Sewer sticker shocker
The low bid for a new trunk sewer line to the Airport Employment Growth District (AEGD) is $35 million higher than budgeted just four years ago. And it is more than twice the original expectation when it was planned in 2009, calling into question the claimed financial benefits of the huge AEGD boundary expansion.
The AEGD (formerly called the aerotropolis) was approved by council in 2006, but only finalized in 2015 by a decision of the Ontario Municipal Board. It has been touted as a major economic boost for the city that is forecast to provide large tax and employment benefits.
“Between 2011 and 2031, the AEGD is anticipated to have employment growth of 24,360,” said a 2010 study. “By 2031 Stage 1 of the AEGD is forecast to generate a positive impact on the city’s property tax base of approximately $66 million.”
Last week’s sewer sticker shock was just one of several conveyed to councillors at the May 16 public works meeting reflecting the multiple economic crises now clobbering the city budget. Thirteen years ago the 10 km pipe was estimated to cost $44 million. By 2018 the expectation had risen to $73 million.
Today the low bid tops $114 million and the only other one received by the city exceeds $245 million. The drastic difference led Lloyd Ferguson, who has a long history in private business, to offer some explanation to his colleagues. “They needed a buddy to throw in a second bid which was $100 million different,” he noted. “This doesn’t pass the smell test.”
Nevertheless the recommendation to increase the sewer budget was approved without opposition after staff confirmed that the cost is expected to be covered by development charges. These fees collected from new developments are supposed to ensure the costs of growth are not borne by existing residents.
However, various provincial restrictions along with council-granted discounts mean the actual collections fall far short of that goal. Covering just the shortfall from these discounts to the sewer and water budget costs $9 million each year to cover and a similar amount is also charged to taxpayers in the annual capital budget.
Development charges are collected when new growth actually occurs. Some are gathered from residential developers and the remainder from those building new commercial or industrial facilities. The new sewer pipe is to run between Highway 56 and Upper James Street, along Dickenson Road and Golf Club Road.
It is located entirely in the rural area outside the urban boundary where new residential development is not permitted. Its stated purpose is to service hoped for non-residential growth in the AEGD. However, nearly two-thirds of the development charges are being assigned to residential growth and just 37% is to be covered by the non-residential developers.
Multiple factors for the steep climb in the sewer’s costs are listed in the staff report. These include extra geotechnical investigation, supply chain issues, higher labour costs, more environmental restrictions, required tunnelling, and a big increase in consultant time “from 5792 hours of part time administration to 17,325 full time hours.”
In the same May 16 public works meeting, councillors also approved an extra $5 million for emergency repairs to the Woodward Avenue sewage plant; an increase of $1.5 million for reconstruction of Barton Street East; and $8 million more for management of excavated soils and rock to comply with new provincial rules.
“These cost escalations have had a marked impact across Ontario and it is expected that additional costs will inflate on average approximately 25%,” explained the staff report on the latter hit to the city’s budget. “Increases related to excess and contaminated soils are typically more prevalent in projects requiring deeper excavations, such as watermain and sewer installations, as well as bridge replacement and full road reconstruction.”
