2019 DC Study Policy Issues – External Stakeholder Meeting Minutes

Date / Time: March 20, 2017 2:00pm – 3:00pm

Location: Committee Room #1, City Hall

Invited/Attended: Martin Hayward (Chair), Sandy Levin, Amanda Stratton, Lois Langdon, Jamie Crich, Craig Linton, Peter Christiaans, Matt Feldberg, Adam Langmuir, Kevin Edwards, John Fleming, Gregg Barrett, Kelly Scherr, George Kotsifas, Jennie Ramsay, Shawna Chambers, David Gough, Peter Kokkoros, Angelo DiCicco

Purpose: • To establish policy framework for 2019 DC Study & By-law update.

Agenda Item Issue / Discussion

1. • Interim Financing Costs

o Memo provided at meeting (attached) o Interest rate determined by the City’s short term borrowing rate, approx. 1.7% APR o Financing costs were already included in the 2014 DC rate, this policy provides

transparency for the calculation for cost recovery to the reserve funds and ultimately credited to the general fund.

2.

• Coordination of SWM Pond Construction

o Shawna Chambers (Division Manager, Stormwater Engineering) gave presentation on DC product delivery, slideshow attached.

o Hyde Park 1B1 construction timing was a contributing factor to the creation of the just-in-time stormwater management practice.

o A registered fully serviced subdivision is a better measure for efficient use of infrastructure investments vs. permits being pulled within 1 year of SWM pond completion

o Under the UWRF the developer made it work with the cut/fill material to absorb it onto the site

o Under City Services coordination needs to happen up-front prior to Draft Approval, so conditions can be included for the developer to absorb material on-site

o The reserve fund should not bear the cost of trucking the unwanted material off-site o As discussed in the presentation, the City will continue to construct SWM Ponds but will

build efficiencies into the process.

3. • Payment draws on developer led CSRF projects

o Scope needs to be considered along with estimated duration of the works being done o Possibility to split into 2 classes major and minor works for payment draws o Still being discussed internally

4. • Calculation Timing of DC’s o Wording change for by-law still being worked on, update will be given at next

stakeholder meeting

5. • Other Matters o Further meeting to be scheduled to finalize outstanding policy issues.

Next Meeting: Tentatively Scheduled for April 10, 2017 2:00-3:00pm

2019 Development Charges Study: DC Policy Review – Interest on use of Working Capital External Stakeholder Meeting – March 20, 2017

Development Finance Mar. 22, 17 London External Stakeholder Committee

Background:

Financing of Construction in Progress

The sequence of expenditure and financing for a Growth project is depicted in the graphic below.

• Growth projects use taxpayer funded working capital to finance growth share of expenditures, until planned debenture financing is ultimately issued;

• There is an “opportunity cost” in the form of lost interest income, to the use of the City’s working capital. This working capital is generally provided from cash reserves and property taxes;

• The City’s DC rate calculations already incorporate provision for estimated financing costs. The financing costs represent an additional draw on funds available to finance DC projects, and a windfall for the General Revenue fund.

Historical Context

• Individual developers formerly funded UWRF infrastructure (ie. dedicated lands; built and financed SWMF’s, sanitary sewers, storm sewers)

o Depending on UWRF levels and magnitude of claim, claims may remain developer funded for some time;

o Following 2014 DC policy changes : City undertakes funding of most SWMF’s; o Policy change resulted in shift of financing responsibility away from UWRF to CSRF

• Decline in Transportation DC RF has introduced need to debt finance some Transportation improvements from Debt

o BRT will increase DC debt funding component. o With debt funded Transportation projects comes interim borrowing from taxpayer funded working

capital • Timing of policy change is appropriate

Growth Project$100k

80%Growth share

$80K

File : ….Financing costs related to Construction in Progress.External Stakeholders.vsd

Involves interim borrowing until debt is issued

20%Non-growth share

$20K

Funded from Tax/user rates sources – eg. reserve and reserve funds, capital levy,

taxpayer funded debt

if cash balance is available...funding for Growth share of project generally provided by DC Reserve Fund

Growth share is Funded by debt

Growth Projects: Approach to Financing Construction in Progress

EXAMPLE

..two options...

2019 Development Charges Study: DC Policy Review – Interest on use of Working Capital External Stakeholder Meeting – March 20, 2017

Development Finance Mar. 22, 17 London External Stakeholder Committee

Analysis Impact of implementing the charges was assessed through the following steps:

• Current borrowing position of DC Reserve Funds from General fund working capital was determined using the following formula :

Borrowing position of each DC funded project = Total growth share(%) of capital project x Actual Expenditures ($) to date (ie.Theoretical maximum

growth responsibility for project to date) Less:

Actual DC funded Debt issued to date Less:

Actual DC funded RF draws

Eg…….90% growth share x $3,123,456(Actual expenditures to date) – Funded to date :1,000,000(DC interim debt) – 500,000 (DC RF cash drawdown) =

$1,311,110 (Project to date – interim borrowing position) @ 1.7% interest for 1 month = $1857

Summary Results

• Current “DC funded growth projects - borrowing position” was determined to be approximately $22.4M • Assumed an interest rate approximating the City’s short term borrowing rate; • Assuming the current borrowing position is representative of future single month, actual level,

and…assuming constant balance through the month, interest on borrowings would be = $31,671 on an annual basis, this would work out to approximately $380,000

• Interim borrowing position on DC Debt funded growth may last several months (eg. Sanitary trunk sewer construction), or may last years (eg. complex road building project spanning years of design and construction)

Points to consider : • use of taxpayer supported working capital stems from increasing need to debt finance projects

benefiting growth; • Use of working capital is expected to grow as more projects funded from DC’s are debt financed; • City’s working capital is, as a result, bearing increasing burden for financing costs due to :

o change in funding from UWRF to CSRF … some(not all) of the financing burden previously borne by individual developers (prior to 2014 - for eg. SWM pond construction) to the City’s Capital Fund;

o increasing level of debt financing needed to enable investments in growth infrastructure; • Financing costs already built into the 2014 DC rate calculations – this element of the financing costs

is now being identified, and will be recommended for implementation.

Implementation 1. Upon Council decision to proceed 2. Fund Accounting process :

a. At end of each month, after all DC draws have been made for growth funded capital projects, a project by project “interim borrowing analysis” is completed which calculates the “interim borrowing position of each capital growth project” at that point in time;

b. Interest Expense is calculated based on the average “interim borrowing position” of each project (ie. average of current month end borrowing position and previous month end borrowing position). Interest rate to be applied to the average borrowing position for the month is equal to City’s short term borrowing rate on General Fund borrowing (prime minus 1% at the time of writing);

c. a charge against various DC RF’s and offsets interest earnings in those funds. Interest expense is not capitalized against individual projects;

d. Interest Revenue is credited to General Fund;

Shawna Chambers, P.Eng.Division Manager, Stormwater EngineeringMarch 20, 2017

Stormwater Engineering Division DC Project Delivery

2017 and 2018 SWMFs

• 17 proposed facilities• Servicing >1000 ha• $70M DC investment

2017 Pond Construction

NO. PROJECT BUDGET STATUS

1 Wickerson SB $ 3,226,700 Substantially complete. Landscaping Spring 2017.

2 Tributary C (3 ponds) $ 13,906,700 Construction underway as of March 2017.

3 Fox Hollow 3 $ 7,777,800 Construction starts May 2017.

4 Old Victoria 1 $ 2,264,938

ECAs received. Tender anticipated Q2.5 Dingman Creek B4 $ 3,638,342

6 North Lambeth P9 $ 5,150,000

7 Stoney Creek 2 $ 1,994,242 Functional Design underway. Construction possible late 2017.8 Pincombe Drain 3 $ 2,448,034

2017 TOTAL $ 40,406,756

2018 Pond Construction

*New design assignments to be initiated subject to submission of Development Application and 2018 GMIS results.

NO. PROJECT BUDGET STATUS

1 Parker $ 4,367,000 Functional Design underway. Tender anticipated Q1 2018.

2 Mud Creek $ 5,754,000 Mud Creek EA underway. Phase 1 Construction target 2019.

3 North Lambeth P7 $ 3,605,565 Dingman Creek EA underway. Ph 1 Development proceeding to existing pond.

4 Hyde Park 5 $ 5,518,000 Hyde Park EA Addendum underway. Revisions expected to strategy.

5* North Lambeth P10 $ 4,079,581 EA underway. Primarily non-growth facility.

6* Sunningdale 6A $ 1,696,409

EAs are complete. Design has not been triggered.7* Stoney Creek 7.1 $ 1,668,185

8* Stoney Creek 10 $ 1,961,000 9* Sunningdale E1 $ 1,961,950

2018 TOTAL $ 30,611,690

SWM Requirements

Source: http://www.ceriu.qc.ca/sites/default/files/c1_1_glen_macmillan.pdf

Water Balance

http://www.upstreammatters.com/green-infrastructure-low-impact-development-providing-watershed-resiliency-for-more-sustainable-communities/

LID Requirements

Algae Blooms: Lake Erie

9

Phosphorus and other nutrients contained stormwater entering Lake Erie:• 80% is from agriculture in the watershed,• 20% is from urban areas in the watershed.

Of that 20% from urban areas:• 12% is from stormwater• 8% is from Pollution Control Plants.Source: International Joint Commission, Lake Erie Ecosystem Priority, August 2011

Photo: International Joint Commission, Lake Erie Ecosystem Priority, August 2011

Stormwater Engineering Division Goals

Protect Public Health and SafetyMeet legislative requirementsBe consistent and reasonableBe open to innovation/optimizationBuild trust in all relationshipsDeliver the goods - on time & on budget

Photo credit: Paul Roedding Photography

SWMF Success Factors

1. Project Team2. Meeting Environmental Requirements3. Provincial Approvals4. Cut/fill Balance5. Construction6. Assumption7. Land Transfer8. Just in Time Delivery

1. Project team

Challenge:• Design requirements are

becoming more complex• Specialized multidisciplinary

team now required for all projects

Action: Open Prequalification of Engineers • Right level of consulting team for

the job• Reduces review time by City as

Scope of Work is clearly defined from the onset.

• Coordination with developer is early and often.

Photo: http://www.leadbyadventure.com/2014/01/16/critical-teamwork-skills-top-teams/

2015-2017Prequalified Consultants

Category Consultants

1 Ricor Engineering Ltd.Strik, Baldinelli, and Moniz

2

Development Engineering (London) Ltd.Dillon ConsultingEcoSystem Recovery Inc.IBI GroupMTEStantec Consulting Ltd.

3AECOMAquafor Beech Ltd.CH2MMatrix Solutions Inc.

2. Environmental Requirements

Challenge:• Environmental constraints often

cause most significant delays • Species at Risk and Provincially

Significant Wetlands introduce MNRF involvement

Action: Trust building • City continues to build trust with

agencies (MOECC, MNRF, UTRCA and internal City divisions)

• Build ponds outside of Natural Heritage System; outlets remain a challenge.

www.goodwork.ca

2. Provincial Approvals

Challenge:• Direct submission Environmental

Compliance Approvals (ECAs) take 6-9 months to receive from MOECC

Action: City working with MOECC • Reviewing expansion of Transfer of Review

program to include more stormwater works• Pilot Project underway to create one

Stormwater ECA during Dingman Creek EA

Dingman Creek Subwatershed

2014 DC Facilities

Dingman EA – “Land of Lakes” to be reviewed

4. Cut/fill balance

Challenge:• Developers have expressed there may be

additional costs for cut/fill when City leads project

Actions: • Developers are offered topsoil and excavated

material from City projects• Similar to UWRF facilities, excess or unwanted

topsoil and excavated material is moved offsite

Proposed change: Volume of material to be provided to developer earlier in the process

4. Cut/fill balance

Example:Wickerson SB

• 73,000 m3 to excavated material available.• 41,800 m3 of excavated material requested by

adjacent land developers and provided through City contract.

• 10,700 m3 of topsoil available.• 0 m3 of topsoil requested by adjacent land

developers.

5. Construction

Challenge:• Low bidder not ideal for SWM

projects adjacent to natural watercourses

Action: Prequalified Contractors • Based on previous experience

with environmentally sensitive projects

• Competitive tenders have resulted to date

http://tjconst.com.au/earthworks/4578426314

Prequalified Contractors2017 – 16 contractors

• 291 Construction Ltd.• Birnam Excavating Ltd.• Blue-Con Construction• Bre-Ex Construction Inc.• Bronte Construction Ltd.• C.H. Excavating (2013)• Clearway Construction Inc.• Dekay Construction (1987) Ltd.• Dynex Construction Inc.• J-AAR Excavating Ltd.• L82 Construction Ltd.• RM Construction• Ron Murphy Contracting Co. Ltd.• Van Bree Drainage and Bulldozing Ltd.• VanRooyen Earthmoving Ltd.• Ward & Burke Micro Tunneling Ltd.

Recent Tender Results

1 – Values include contingency allowance.2 – Values do not include contingency allowance.3 – Based on consulting engineer’s estimate prior to tendering.

City BuiltSWM Facility Name Year Tendered Pre-tender

Estimate3Contract Award Deviation Percent

Deviation

Fox Hollow SWMF 3 2017 $6,200,000 $5,600,000 -$600,000 -9.7%

Tributary C SWMF A, G, F and Temporary A1 2017 $8,624,516 $7,272,473 -$1,352,043 -15.7%

Wickerson SB SWMF1 2016 $2,420,820 $1,752,337 -$668,483 -27.6%

Dingman Erosion Control Facility1 2015 $5,655,812 $4,351,269 -$1,304,543 -23.1%

Old Victoria SWMF 21 2013 $990,000 $654,723 -$335,277 -33.9%

Hyde Park SWMF 41 2013 $7,861,419 $6,463,011 -$1,398,408 -17.8%

Total of Above1 $31,752,567 $26,093,813 -$5,658,754 -17.8%Developer Built

SWM Facility Name Year Constructed

Pre-Tender Estimate3

Contract Award Deviation Percent

Deviation

Stoney Creek SWMF 42 2016 $1,003,055 $840,510 -$162,545 -16.2%

6. Assumption

Challenge:• Significant time lapse

between construction and assumption

• Many UWRF Stormwater facilities have not been assumed

Action: No assumption process• City conducts monitoring and

“assumes” facility following construction

https://www.raleighnc.gov/home/content/PWksStormwater/Articles/StormwaterMonitoring.html

7. Land Transfer

Challenge:• Negotiating land with private property owners

outside of the Draft Plan

Action: • Review DC Land Acquisition Policy through the

2019 DC Process

8. Just In Time Project Delivery

Challenges:• Current process may lead to

constructor issues with local servicing contractor

• City Contract Award Process is 3 months long for projects >$3M

• Developers have “skin in the game” prior to the end of subdivision drawing approval

http://www.12manage.com/methods_jit.html

8. Just In Time Project Delivery

Proposed 2017 Pilot to adjust JIT process:• City to construct facilities upon

transfer of land and completion of Design Studies;

• Adjustments to the Design Studies process could further expedite SWMF construction.

OR…

8. Just In Time Project Delivery

Proposed 2017 Pilot to adjust JIT process:• City to construct subject to agreement with developer

to construct homes within 1 year• If homes are not constructed within 1 year, interest/carrying

charges would apply.

http://business.financialpost.com/personal-finance/mortgages-real-estate/home-building-picks-up-offering-latest-sign-canadas-economy-is-on-upswing

Proposed Changes

1. City open to Pilot adjustments of the JIT process to build facilities.

2. Cut-fill to be discussed with the developer earlier in the subdivision process (during functional design).

3. Land Acquisition policy to be reviewed during 2019 DC Update.

4. Low Impact Development Policy will be considered during 2019 DC Update

Successes to date

Consultant selected based on complexity of project

One ECA Pilot Project for South London

Transfer of Review amendment discussions with MOECC

Prequalification of Contractors

No developer assumption process

Working with developers for cut-fill opportunities

Conclusions

• City maintains it is in best interest for Stormwater Engineering Division to continue project management

• Pilots proposed to Just In Time process should better meet needs of development community.

https://clipartfest.com/categories/view/a8f26b1d85ce0ddcc18e86031c3bca3c09be26f0/working-together-clipart.html

Thank You

Dingman Creek Sunrise Photo Credit: Paul Roedding Photography

Fox Hollow SWM 3and Open Channel

RiverBendSWMF Trib.C SWMF G

RiverBendSWMF Trib.C SWMF F

Old VictoriaSWMF 1

Wickerson SB

NorthLambeth P9

PincombeDrain

SWMF 3

Riverbend SWMFTrib. C SWMF A

StoneyCreek

SWMF 2

DingmanTributary

SWMF B4

StoneyCreek 7.1

StoneyCreek 10Sunningdale

SWMF 6A

SunningdaleSWMF E1

Hyde ParkSWMF 5

North Lambeth P10(Dingman Tributary

D2) Phase 1

NorthLambeth P7

Mud CreekSWMF 1

ParkerSWMF

Dufferin Ave

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City of London2017 and 2018

Pond Construction

F

Legend2017 Pond Construction2018 Pond ConstructionAssociated MinorCatchment AreaCity BoundaryWater BodyMajor RoadsRailwayUrban Growth Boundary

Scale: 1:65,000

Year 2017 2018 Total

Area 495.10 546.23 1,041.33

Extent of Catchment areas (ha)