Here’s the scenario….  Your company has a great idea for a new product and the decision is made to construct a new facility.  In fact, there is so much excitement around the facility that they decide to put it on the “fast track” and build it in six months instead of the originally planned twelve months.  Of course this will add significant cost but the new product produced at the new facility is going to be so big that “fast track” is the only option for the facility.  Will this additional cost increase the taxable value of the facility?  Depending on who you ask, you might get different answers.  An aggressive tax assessor might say yes….  I’m going with no.

Thankfully, property taxes are based on value, not on how much money you might want to throw at a facility.  Value requires that we look at the facility through the eyes of a potential investor.  Would an investor pay more for a facility that cost more to build because it “had to be completed” in six months rather than for a similar property that incurred more “normal” costs and timeframe to build?  I think not.

Generally, excess costs in “fast track” construction will fall into two categories: additional equipment and additional labor.  Let’s start with the additional equipment…..  A “normal” construction project might require the rental of two large cranes for 12 months.  That same project completed on the fast track might require four cranes for 6 months.  The short-term rental of four cranes will likely be on a higher “per month basis” due to the shortened timeframe, which will add more cost to the project.

Now, quantifying excess labor costs can be more challenging…  People are generally less predictable than machines.  Where a “normal” project might utilize one shift of workers per week at standard rates, a fast track project might utilize two or three shifts paid at a premium rate.  And then, there is the whole issue of productivity…..  A study conducted by Columbia University concluded that as hours increase, absenteeism and injuries also increase.  For hours above 48 per week, it takes three hours of work to produce two hours of output…..  Go figure.  Some of you may be thinking “hey I know people who take three hours of work to produce two hours of output at far less than 48 hours per week”.

Excess costs for “fast track” do not have to add to your taxable value.  Do your homework, quantify the costs.  If you’re going to take the fast track - don’t get burned.