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HomeMy WebLinkAboutFIN-2021-21 - Middle Strasburg Trunk Sanitary Sewer Budget Increase REPORT TO: Council DATE OF MEETING: June 28, 2021 SUBMITTED BY: Gross, Hans, Director of Engineering Services, 519-741-2200 ext. 7410 PREPARED BY: Spere, Chris, Manager, Construction Engineering, 519-741-2200 ext. 7412 Hagey, Ryan, Director, Financial Planning and Reporting, 519-741- 2200 ext. 7353 WARD(S) INVOLVED: Ward 5 DATE OF REPORT: June 10, 2021 REPORT NO.: FIN-2021-21 SUBJECT: Middle Strasburg Trunk Sanitary Sewer Budget Increase RECOMMENDATION: That the budget for the Middle Strasburg Trunk Sanitary Sewer (MSTSS) be increased by $6,000,000, funded by development charges. REPORT HIGHLIGHTS: The purpose of this report is to increase the budget for a project that is more complex than initially thought due to significant groundwater and soils challenges The financial implications are limited to an additional transfer from the development charges reserve, which is completely funded by growth. This report supports the delivery of core services. BACKGROUND: The Middle Strasburg Trunk Sanitary Sewer (MSTSS) is located in the southwest part of the city, in the vicinity of the Bleams Road and Fisher-Hallman Road. The project is required to develop different parcels of developer-owned land and is also key in delivering some public pieces of infrastructure including a branch library, community centre and school. The MSTSS project was identified as a fully growth-related piece of infrastructure through previous development charges studies. It was also subject to a credit/refund agreement with developers that wanted to advance its construction ahead of its 2022 construction timing. An agreement was originally approved by Council in 2018 and then updated/amended in 2019. Construction of the MSTSS was publicly tendered by the City and was awarded in the spring of 2020 at a cost of $15.5M. This was somewhat above the estimated cost of $14.7M, but still within the acceptable range of 120% (or $17.64M) contemplated in the credit/refund agreement. Based on the terms of the agreement, the developers had an option not to *** This information is available in accessible formats upon request. *** Please call 519-741-2345 or TTY 1-866-969-9994 for assistance. proceed if the cost of the project was beyond $17.6M, but since it was being awarded at $15.5M, the tender was awarded. Work began in 2020 and is expected to be finished by the summer of 2021. REPORT: During the construction of the project, significant groundwater and soils challenges were encountered. These challenges were well beyond what was expected based on the information gathered from the boreholes drilled to test the underground conditions during the design phase of the project. The boreholes did not indicate the extent of groundwater and the frequent changes in soil type that have been experienced during construction and the issues encountered could not have been reasonably anticipated at the time of tendering the project. The additional construction complexities have led to claims for extra payment by the contractor in the range of $6M. The claims relate to the following activities and works by the contractors and consultant, some of which will take place during June and July 2021: Removal and disposal of additional marl soil at the south-west corner of Fischer Hallman Road and Bleams Road including dewatering, removal and stockpiling on site to dry the soil, removal and disposal off site, and replacing the excavated marl soil with dry, compactable soil from the site. Additional, time, labour and equipment to dewater and manage the groundwater inflow during the installation of the sewer using both open cut trenching and tunneling methodologies. Changing the installation methodology of a section of sewer adjacent to the Huron Natural Area from open-cut trenching as per the design drawings to tunneling due to the extremely high inflow of groundwater. Stand-by costs for the contractors to allow for additional examination and assessment of the soils and groundwater conditions for the sewer to be successfully installed. Additional consultant engineering costs for the additional assessment of soils and groundwater conditions. Claims of this size are exceptional, and well beyond a normal contingency budget for a project of this scope. The nature and value of the claims have been reviewed by City staff, the project design consultant and the contract administration consultant. The cost increases proposed to continue and successfully complete the project are reasonable based on the conditions experienced. Based on the soil and groundwater conditions experienced during the MSTSS project, the developers involved with the credit/refund agreement are anticipating significant cost increases for their proposed developments as well. ditional unanticipated costs for the MSTSS be funded by development charges . While the project is subject to a credit/refund agreement with the developers, had the full costs of the project been known at the time of tender (now estimated to be $21.5M), the developers would have had the option to not proceed with the project, since it exceeded the cut-off price in the agreement ($17.64M). Now that the total project costs well exceed the upper limit in the agreement, staff believe the only viable option is to transfer the additional funds from the DC reserve. STRATEGIC PLAN ALIGNMENT: This report supports the delivery of core services. FINANCIAL IMPLICATIONS: The recommendation would result in a $6M transfer from the Development Charges reserve to the Middle Strasburg Trunk Sanitary Sewer (MSTSS) capital account. Before considering this transfer, the DC reserve is projected to have a balance of $8.8M at the end of 2021. If the recommendation is approved, the ending balance would instead be $2.8M at the end of the year. Further, the City is undertaking an update of its DC bylaw, so any change in the DC reserve balance would be accounted for in the rates of the new DC bylaw (ie DC rates would increase to account for lower than projected DC reserve balances). COMMUNITY ENGAGEMENT: INFORM This report has been of the council / committee meeting. PREVIOUS REPORTS/AUTHORITIES: INS-18-012, Middle Strasburg Trunk Sanitary Sewer-Credit/Refund Agreement Request DSD-19-063, Middle Strasburg Trunk Sanitary Sewer-Credit/Refund Agreement Request APPROVED BY: Justin Readman, General Manager, Development Services