The URL can be used to link to this page

Home My WebLink AboutFIN 20-13 city co Report Council 411, I KERING Report Number: FIN 20-13 Date: September 16, 2013 From: Paul Bigioni Director, Corporate Services & City Solicitor Subject: Pre-2014 Capital Budget Approval — Indoor Soccer Facility Recommendation: 1. That Report FIN 20-13 of the Director, Corporate Services & City Solicitor be received; and, 2. That Council cancel the previously approved 2013 capital project - New Parking Lot for Indoor Soccer Facility (Account 5315.1302) that was funded by Duffin Heights land sales; 3. That Council change the 2013 Capital budget approval and corresponding funding • for the Indoor Soccer Facility from $4,876,090 to $337,594 and this amount be used for architectural and engineering services for the indoor soccer facility; 4. That Council approve the financing for the architectural and engineering services for the indoor soccer facility as follows: a) The sum of$161,201 be funded by a transfer from the Development Charges (DC)-Recreation Facilities Reserve Funds; b) The sum of$176,393 be funded by a transfer from the City's Share DC Reserve and this amount be included in the memorandum of understanding between the City and Pickering Soccer Club; 5. That Council provide pre-2014 Capital Budget approval for the construction of the Indoor Soccer Facility and new parking lot at an estimated cost of$7,146,605; 6. That the (Acting), Division Head, Finance & Treasurer be authorized to finance the estimated project cost for the construction of the Indoor Soccer Facility as follows: a) The sum of$3,412,504 to be funded by a transfer from the DC-Recreation Facilities Reserve Fund; • b) The sum of$3,734,101 to be financed by the issue of debentures by the Regional Municipality of Durham over a period not to exceed 15 years, at a rate to be determined; 37 Report FIN 20-13 September 16, 2013 Subject: Pre-2014 Capital Budget Approval — Indoor Soccer Facility Page 2 • c) The annual repayment charges in the amount of approximately $324,000 be included in the memorandum of understanding between the City and Pickering Soccer Club for repayment and any financing cost to be paid out of the Current Budget. 7. That the financing of land ons CenitreedLan'with facility dpurchase) in theamount1 area of the new Operations of $1,224,071, previously approved as debt financing be changed as follows: a) The sum of $584,494 be funded by a transfer from the DC—Recreation Facilities Reserve Fund; b) The sum of $639,577 be funded by a transfer from the City's Share DC Reserve and this amount be included in the memorandum of understanding between the City and Pickering Soccer Club; • 8. That the appropriate City of Pickering officials be authorized to take necessary action to give effect thereto. • Executive Summary: The 2013 Council approved Capital Budget included two • projects for the indoor soccer facility: dome construction ($4,876,090) and indoor soccer parking lot ($500,000). The tender for the dome construction recently closed and the project's cost excluding architectural and engineering fees is $6,388,493. This higher cost is mainly due to the need for increased area of the clubhouse, increased width of the artificial air support structure, increase in the number of parking spaces, site servicing and site works required for the new Operations Centre, deeper foundations required due to poor soil conditions and increased contingency to address any issues related to the project. The_tender amount exceeds the 2013 project's budget by a substantial amount and staff therefore recommend that an alternative financial strategy be applied for this project. The City is currently completing the 2013 Development Charge Background Study and an opportunity has been identified to use development charge funding for this project's cost. The 2013 DC study is predicated on using the full Non-Residential DC rate and this assumption has been used in determining the financing for the various cost elements in this project. This approach is consistent with the draft Seaton FIS document (April 10, 2013 version) presented to Council in April of this year. The Operations Centre land and the indoor soccer parking lot (previously approved) were being financed by future Duffin Heights land sales. These expenditures are now being partially financed by development charges resulting in Duffin Heights land sales dollars now becoming available for other projects. Using this financial strategy will allow . the project to proceed and be completed for the late spring 2014 indoor soccer season. 38 Report FIN 20-13 September 16, 2013 Subject: Pre-2014 Capital Budget Approval — Indoor Soccer Facility Page 3 • 9 Financial Implications: The project's total cost breakdown is provided below: Description Total Development PSC Cost (net of HST Charges Rebate) Reserve Fund Construction & Contingency $7,146,605 $3,412 504 $3,734,101 Cost $3 734 101 (Debt) Assume 25% Occupancy 1,224,071 584,494 639,577 (City Share DC Architect & Engineering Fees 337,594 Reserve) 161,201 176,393 (City Share DC Estimated Project Cost $8,708,270 Reserve) $4,158,199 $4,550,071 Under this new proposed financing strategy, the City is able to take advantage of the capital dollars provided by the new development charge study. The debt charges reflected above will be financed through the issuance of debt by the Region for a period no longer than fifteen years. The Pickering Soccer Club (PSC) will be responsible for repaying the debt charges and the City Share DC Reserve funding for a total of $4,550,071 over a 15-year period. • Discussion: Report CS 50-12 regarding the Proposed Indoor Soccer Facility was presented to Pickering Council at the November 19, 2012 Council Meeting. The report included staff recommendations to support in principle the Pickering Soccer Club Indoor Facility Business Plan to develop and operate an Indoor Soccer Facility; provide a pre- 2013 Capital Budget approval for the Architectural & Engineering Services and Construction of the Pickering Indoor Soccer Facility at an estimated total project cost of $4,876,090. In addition, the report approved in principle the debt financing charges for the indoor soccer facility to be fully repaid by the PSC through regular monthly payments until the related debt financing is paid in full. The tender for this project closed on July 29, 2013 and the low bid was substantially above the project's budgeted cost. Finance staff were then presented with the fiscal challenge to develop alternative financial strategies so that the project could proceed. During the 2013 budget presentation and discussions, staff indicated that they would explore alternative financial strategies and tools to reduce the cost of future capital projects. After the 2013 budget was approved by Council, financial staff have been working on the Seaton FIS and the 2013 Development Charge Background Study. The 2013 Development Charge Background Study has identified several opportunities to use DC funding for future capital projects resulting in cost savings for Pickering taxpayers. Many of these projects would have been financed by external debt, however, the DC funding strategy can now reduce, to some degree, the City's reliance • on debt. • 39 • Report FIN 20-13 September 16, 2013 Subject: Pre-2014 Capital Budget Approval — Indoor Soccer Facility Page 4 — — • Without using the DC financial tool, the PSC wo ad to be would aecovered by h gherrenptaln and the higher capital costs would probably have costs or user fees paid by Pickering residents. The additional borrowed amount could have created a financial strain on PSC's indoor soccer business-plan. Using this financial strategy has benefited PSC by approximately $326,000. Recovering Full Project Cost Last year's indoor soccer facility project only included the cost of the facility and related architectural and engineering fees. The indoor soccer dome parking lot and corresponding land was being financed by future Duffin Heights land sales. By applying DC funding to the entire project's full cost, the City is able to have the land and parking lot costs partially covered by development charges resulting in Duffin Heights land sales revenue to be available for other capital projects. In summary, this financing strategy has created an opportunity for the City to apply approximately $1.7 million Duffin Heights land sales revenues to other City capital projects. Memorandum of Understanding: Once the recommendations in this Report are adopted by Council, City staff will draft an agreement between the City and the Pickering Soccer Club that is consistent with the • previously established principles set out in Report CS 50-12 and the Pickering Soccer Club Indoor Facility Business Plan. As shown above under the Financial Implications section, PSC will be responsible for the following: external debt charges issued for the construction of the facility and reimbursing the City for its costs related term. For this faail ty,architectural fees. be fully hesponb ble period will be based on a fifteen year for ongoing operating costs such as hydro, insurance, repairs and maintenance. PSC will ensure that the facility is professionally maintained and operated at all times. PSC will recruit and train staff to schedule various events and activities (including leagues, games, tournaments, coach's clinics and referee clinics) and monitor day-to- day operations. Attachments: None • 40 Report FIN 20-13 September 16, 2013 Subject: Pre-2014 Capital Budget Approval — Indoor Soccer Facility Page 5 Prepared By: Approved/Endorsed By: 7> Stan Karwowski Paul Bigioni (Acting) Division Head, Finance & Treasurer Director, Co so :te ervices & City Solicitor • Recommended for the consideration of Pickering C. Council J • r0, Z013 Tony Prevedel, P.Eng. Chief Administrative Officer • 41