Keller leaders identify funding mix to close $10.4 million Elm Street reconstruction shortfall

City staff told the Keller City Council on Jan. 7 that bids for the Elm Street reconstruction project came in far above the city’s available budget, and presented a package of reallocations and scope options to close the shortfall.

“The bid came in at about 31.6,” staff said, noting the city had roughly $21.2 million in available funding. “That put us about 10.4 (million) over.”

The project covers Elm Street from Keller Parkway south to Bear Creek Parkway and includes stamped/colored pavement, scored sidewalks, marked crosswalks, parallel parking, required ADA work, landscaping consistent with other downtown improvements, a pedestrian and vehicle bridge at the south end and a new parking area adjacent to the roundabout.

Why it matters: Elm Street is a major Old Town connector and the city’s agreement with the county gives the project a hard completion window tied to that partnership. Staff said they must either add money, reallocate funds from other city projects or reduce Elm Street’s scope to proceed.

What staff presented: After rejecting an initial June 2024 bid and rebidding in November 2024, the city received lower prices but still faced a $10.4 million gap between the November low bid and the existing $21.2 million allocation. Staff said consultants’ revised estimates and the November bid were close — the estimate rose to about $31.1 million and the successful November bid to roughly $31.6 million — giving staff confidence the numbers are accurate rather than the result of a calculation error.

Staff identified about $5.56 million of “easy” reallocations from existing project balances, interest income and closed projects, leaving roughly $4.84 million to find. Suggested funding moves included: - Reassigning general-fund cash previously planned for the Mount Gilead project and using additional roadway impact fees to keep Mount Gilead funded (impact-fee-eligible portions). - Pulling accrued interest from CIP, facility and drainage funds. - Using unspent balances from closed or delayed projects (for example, a drainage project where easements could not be obtained). - Drawing some KDC (economic development) funds for trail costs rather than the Elm Street project.

Staff also reviewed causes of cost escalation since the December check-in: inflation, higher-than-expected utility relocation costs, expanded bridge elements, restoration of a staging/parking lot near the church (the “Pecan”/Bear Creek lot), and an increased construction allowance to cover unforeseen work. Those items together accounted for most of the bid increase, staff said.

Scope and trade-offs: Staff presented specific elements that could be reduced or removed to save money — deck concrete, bridge rail lighting, gateway wayfinding arch, street furniture, sound system, and some landscaping/lighting features — but warned removing county-supported elements (such as the bridge work or the south parking lot, which became part of the county’s contribution) may require renegotiation with the county.

Pond dredging and other priorities: Councilors pressed staff about alternatives. Staff flagged Borland Pond dredging as a time-sensitive drainage project that would cost about $700,000 and said it would compete with Elm Street for the same pool of reallocatable funds. Councilors expressed interest in dredging before adjacent development proceeds.

Where the council landed: After discussion the council signaled support for staff’s mix of reallocations and limited use of general fund balance, keeping most Elm Street amenities while avoiding deep cuts to the city’s multi‑year CIP. Council members asked staff to confirm the county’s willingness to accept changes to the south parking-lot component if the city later chooses to defer or reassign that area. Staff said they will contact the county about possible adjustments.

Next steps: Staff said they would bring a contract award recommendation back to council in two weeks and proceed with required negotiations with the county and with the selected contractor. "As of today, this is how we fund it," staff said, summarizing the approach and asking the council if they were comfortable proceeding.

Public record and timeline: Staff noted the city must meet its obligations under the county agreement and that the project is on a schedule to be completed before the end of 2027 under that partnership. Councilors emphasized preserving street-maintenance capacity in future budgets while using available fund balance prudently.

Ending: Councilors generally endorsed the staff plan to use a mix of reallocations and limited general‑fund support to close the remaining gap, while directing staff to verify county acceptance of any changes to the parking-lot element and to return with an award recommendation in two weeks.