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Rancho Santa Fe interchange plans continue

KINGMAN – Poor communication, escalating cost, uncertainty and additional delay were all on display as the Kingman City Council clumsily addressed new revelations regarding the Interstate 40 Rancho Santa Fe Traffic Interchange (TI) during a near five hour long Tuesday meeting.

Vice Mayor Cherish Sammeli was bewildered that the city has only recently learned that it will cost several million dollars more to have the Arizona Department of Transportation (ADOT) administer the project. She asked ADOT District Engineer Anthony Brozich why the city was not previously made aware of its Indirect Cost Allocation Plan (ICAP) fee.

Brozich said that the agency charges the ICAP fees for most major projects it administers for other entities. He mumbled “consultant” once and “developer” on another occasion in explaining that others should have brought the ICAP fee to the city’s attention previously.

ADOT application of its 10.7% rate to the estimated $45.4-million project cost results in an ICAP fee of $4.75 million for the city, pushing the total cost beyond $49 million.

“This keeps me up at night and I’m not the only council member this keeps up at night,” Sammeli said. “I apologize for my frustration, but then again I don’t apologize.”

City staff recommended municipal administration of the project to avoid the ICAP fee. City Manager Tim Walsh said associated savings could approximate $2.5 million because the city would have to hire help for the mix of complex tasks associated with putting the project out to bid, awarding a contract and overseeing construction.

“It will be cheaper if you did it yourself if you have the manpower and the bandwidth to do it,” Brozich said. “I’ll leave it to you to figure out.”

Council member Jamie Stehly said unexpected costs could rise under city oversight and member Shawn Savage favored ADOT administration to shift risk and liability away from the city. And the council voted to move forward and pay the ICAP fee.

Brozich said that ADOT is expected to consider lowering its ICAP rate from 10.7% to 8.8% in early July. It was noted that would shave about $844,000 from the $4.75 million ICAP fee, but Brozich said there’s no guarantee that the city would be reimbursed that amount if it pays an ADOT invoice before the rate is possibly reduced.

While Brozich and Assistant District Engineer Todd Steinberger in recent weeks have publicly informed Kingman officials that the Rancho TI would be put out to bid in late June, Brozich explained Tuesday that procedures and timelines will more likely see it put out to bid in either July or August.

“You’re just full of good news Anthony,” Mayor Ken Watkins told Brozich. 

Sammeli said there’s risk of increased cost each month that passes before the project is advertised.

Kingman’s business partner in the Rancho TI, KDP Manager, was not mentioned once during the meeting. The city and KDP Manager have a Development Agreement detailing a partnership where the entities will equally split the project cost, reduced by a $20 million state contribution secured by former state representative Regina Cobb.

KDP Manager principals Bill Plise and Bill Lenhart are embroiled in litigation and arbitration as they battle for control of the company. Accordingly, the city partner is anything but whole as the project moves closer to bid process.

The question becomes will KDP Manager be able to pay its share of more than $12 million when invoiced.

Legal counsel for Lenhart did not respond to inquiry, though Plise’s public relations representative Denyce Tuller answered by email.

“Our intent remains to fulfill KDP Manager’s obligations as outlined in the agreement, but we must resolve the litigation first,” Tuller replied. “However, we do understand why the city wants to pursue completing the work prior to litigation being resolved. We are working with the city on options that would allow them to move forward with the interchange, but still allows us to fulfill obligations we’ve made.”

City Attorney Carl Cooper and Walsh have confirmed city contemplation of moving forward without KDP Manager and fully funding the entire project, if necessary, adding at least $12 million in additional burden to the public treasury.

“If KDP Manager does not fulfill their obligation, the city will cover the additional costs, pulling from available reserves in the Capital Projects Fund as well as incurring less than $2 million in debt,” Walsh confirmed. He did not indicate how the city would service the debt.

Conceivably, KDP Manager would save more than $12 million but still enjoy the fruit of development of the TI to inflate the value of its property holdings proximate to the project.

“Certainly, if we are not obligated to pay for half of the associated costs, it would seem like a significant benefit to us on the surface, but there would be other impacts that do not benefit us,” Tuller said. “We are currently assessing the overall impact of this potential change and continue to work with the city on solutions that best benefit all parties moving forward.”

There was city and public hope and expectation that the project would be placed on ADOT’s five-year program in 2019. That did not happen, however, as state transportation officials expressed concern over readiness and finances.

It was May 10 when the ADOT communications team was asked if it had any reservation about going out to bid without clarity regarding the status of KDP Manager. The answer came back May 21.

“ADOT’s agreement is with the City of Kingman. Once the city provides a letter to ADOT saying they have the funding available for construction of the Rancho Santa Fe Interchange, the project will go out for advertisement,” said Public Information Officer Garin Groff. “The items with KDP Manager are between them and the City of Kingman. ADOT has no involvement with any contracts or agreements between those parties.”

Dave Hawkins