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
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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;
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
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%