As construction costs rise, some municipalities look to pause infrastructure projects — if they can

A bridge north of Fergus needs replacing, but Centre Wellington township councillors have voted to pause the project for now. 

The bridge over Irvine Creek on First Line was built in 1922 and closed in July 2018 "due to severe structural deterioration," the township says.

The township had put the replacement of the bridge out for tender, but only got one bid back and the estimated cost was much more than the municipality had budgeted.

Mayor Kelly Linton says it's disappointing to only get one bid because the timeline between putting a job out for tender and getting a bridge built is three years.

"I hope that they can get this back out to tender as quickly as possible. And hopefully it was just a one-off," he told CBC News.

"Hopefully the inflation kind of settles down a little bit. Then we can see better prices in the future, a little bit more competition," Linton said.

Linton said it's always a concern that prices will go up even more, but council rarely moves forward on a project when there's only one bid.

Linton says staff have heard a number of reasons why prices are so high right now. Part of it is the cost of materials is now higher.

But some companies are also having trouble getting workers for their crews. That may also be why only one company bids on the project — if a company can't guarantee enough people to do the work, they may avoid trying to get the job, he said.

'Can't just shrug our shoulders'

What's happening in Centre Wellington is one being felt in Guelph, too. 

Mayor Cam Guthrie said the city is contemplating putting some projects on hold, including bridge work on Speedvale Avenue and a new recreation centre planned for the south end. The city budgeted $80 million for the rec centre project; the lowest bid was just over $121 million.

"Whether it's a rec center or a bridge or a road, if the costs are too much, we can't just shrug our shoulders and just be like, 'Oh, well, we'll just move on it,'" he told CBC News. 

"We have to do the fiscally responsible thing, which is pause and have to re-evaluate how to move forward."

Guthrie, who is also chair of the Ontario Big City Mayors caucus, said he's hearing similar stories from his counterparts around the province.

"This is something that municipalities are really starting to have problems with," he said.

Monday, Wellesley Township breaks ground on a new recreation centre in Linwood. In June 2021, the township had set a budget of $22 million, and the province had agreed to pay $16.1 million.

In December 2021, the township approved a new budget of $27.2 million. Last week, Mayor Joe Nowak said the cost has already increased another $1 million because of material costs.

"This has been accounted for in our contingency as well as having the contractor lock in prices early in the design phase," Nowak said. 

Since the project received provincial funding, "we must go forward," Nowak said — even if costs go up.

And when a federal or provincial grant is involved, municipalities are also required to do the work by a set deadline, said North Dumfries Mayor Sue Foxton.

Will inflationary bubble burst?

Municipalities are not allowed to run deficits, so those cost overruns need to be covered in some way.

Guthrie says sometimes money set aside by councils, in what is called reserve funds, can be used to cover costs.

"We don't want to have to go back to the taxpayers. No municipality does," he said. Instead, they may turn to federal or provincial governments for help. 

"Of course, we would love to have upper levels of government help us with that. And that is something that, not only from a mayor position of Guelph, but also from the Ontario Big City Mayors Caucus of the things that we are bringing to the upper level governments' table to try to help us fund."

Guthrie and Linton both said pausing projects does run the risk that the price will continue to rise and become more expensive.

But Linton says rather than paying more for projects, he says he hopes things settle down so Centre Wellington can build its bridge.

"I think we're in a bit of an inflationary bubble right now and we're hoping that you go back out to tender and you get some kind of competition and that kind of drives the price down closer to what our budget is," he said.