Sallisaw Mayor Shannon Vann said Thursday that bids for the two bids for the new building were for $1,492,797 and $1,744,000. "We hoped the bids would come in for less than $1 million," Vann said.
Earlier this year, Cellofoam and city officials reached an agreement through which the company planned to expand. The city was to build a new manufacturing plant for the company which would lease the plant back, at $7,500 a month, on a 10-year lease, which would pay for the building.
City commissioners opened bids for a the new building for Cellofoam at their Sept. 12 meeting. The low bid was for $1,494,797 from Wear Construction in Fort Smith, Ark.
Cellofoam manufactures expanded polystyrene (EPS) foam insulation products and EPS products such as Permafloat dock flotation drums. The Sallisaw plastic foam manufacturing site is one of several Cellofoam plants across the United States.
As the first step in expansion, Cellofoam managers rented the former Super H Grocery store at the intersection of Choctaw and Cherokee Avenues in Sallisaw where they planned to continue operations until the new manufacturing plant could be built.
The plant will be in the Sallisaw industrial park where a roadway is already under construction.
But with bids on the new plant at least $494,797 over the expected costs, Vann said the city is having to revamp its offer to Cellofoam.
Vann said Friday's special meeting to amend the lease agreement between the Sallisaw Economic Authority members, with are also the city commissioners, and Cellofoam North American was to expedite the building process if Cellofoam officials agree to the new lease.
"We don't know if they (Cellofoam officials) will agree to the new lease, but if they do, then there are some deadlines to be met," Vann said.
The deadlines include one for an application for additional funding from the Oklahoma Department of Commerce, which is being asked to fund part of the project prior to Oct. 12. The city has applied for a $350,000 loan, which is a zero-interest loan. Vann also explained that, if the city continues with construction plans, and if it shown that new jobs were created by the new manufacturing plant, then the Department of Commerce may forgive up to 75 percent of the loan.
Awarding the construction contract also faces a deadline. At the Sept. 14 meeting, City Manager Bill Baker asked if the contractors minded extending the review time period to 60 days, and the contractors agreed to a November deadline.
Vann said city officials have met with the low bidder, Wear Construction, and have managed to lower the cost of the new plant to $1,167,232, which increases to $1,320,00 will all expenses totaled. Still that is more than was expected, Vann said.
The new lease will be for 15 years at $8,995 per month to pay for the higher construction costs. The new agreement also deletes a penalty clause and is contingent upon the Sallisaw Economic Authority obtaining all necessary funding for the project.
"I don't know what they will do," Vann said about Cellofoam officials. "We met Tuesday and presented our proposal to them."
Vann said the price of building materials continually increases, and has been pushed even higher by the hurricanes that hit the Gulf Coast states.
In his memo to city commissioners, Baker noted, "...the price of steel, concrete, building materials and fuel have increased significantly. In addition, Hurricane Katrina prompted even higher prices and caused concern for building contractors - resulting in higher bids due to economic uncertainty."
Vann said Thursday that not only is gasoline going to China and other developing nations, but he has been told building materials also continue "to leave the country."
"Concrete and steel are leaving the country," Vann said. "I had a builder tell me that, as of Saturday, the price of steel was going up 9 percent. He said insulation was going up too. Building costs are on the rise, and the hurricanes are enhancing those costs."
Vann said increasing building costs will impact other city projects too, especially the city's new water treatment plant.
"There are lots of things going on in the construction industry that are going to affect our city projects," Vann predicted.
He concluded, "It's one of those things that everybody is experiencing.
"But our goal is to have the best option we can for Cellofoam, and hopefully we're doing that. We want to move ahead with construction plans."
