ADMINISTRATIVE REPORT

Date: July 4, 2001
Author/Local: P. Bremner/6720

RTS NO. 02060

CC File No. 1501

Council: July 31, 2001

TO:	Vancouver City Council
FROM:	General Manager of Engineering Services
SUBJECT:	Funding - 1353 Chess Street - Works Yard

RECOMMENDATION

A. THAT Council approve funding of $5,006,000 for the new engineering Chess Street Works Yard as outlined in this report and detailed in Table 2 - Funding Source where any financing be subject to the terms and conditions acceptable to the Director of Finance; and,

B. THAT as part of the financing growth review, staff continue their review of the application of Development Cost Levies (DCLs) and report back on the issue of applying DCLs to civic projects.

GENERAL MANAGER'S COMMENTS

The General Manager of Engineering Services recommends approval of the foregoing.

COUNCIL POLICY

Council approved a new Works Yard as part of the current Capital Plan.
Council approved the relocation of the Recycling facility to the Kent Avenue Yard.

SUMMARY

As part of the current Capital Plan, $18.588 million was identified for new works yard construction to replace Cambie Yard with $15.928 million to come from the Capital Plan and $2.66 million to come from the Solid Waste Utility and the Equipment Plant Account. Work completed in the first phase of the yard design has refined the design, updated the cost estimates and established the overall building and site layout for the works yard. Detailed design is still to be completed.

There have been a number of changes in scope affecting the yard program and the cost estimate. Further impacts result from the introduction of Development Cost Levies (DCLs). To try and stay within the original plan, the works yard program has undergone a peer review and a budget review exercise to arrive at the current program. This resulted in significant revisions and cuts to the program. Even with this, the overall impact of these changes is an increase of $3.4 million in the estimated cost of the new yard from $18.588 million to $22 million.

This report proposes a variety of mechanisms to deal with the funding shortfall. The shortfall in funds will be partially addressed through a recent sale of Engineering land, through the design and construction process, and if necessary through additional reductions in scope. The utility components are funded from existing budgets and the garage facility is financed through an internal loan as detailed in the report.

Even with these measures and reduction in scope, there will be a shortfall of approximately $816,000. Construction management will be used to build the yard rather than a general tender to retain enough flexibility to address the shortfall. Involving a construction manager early in the design process allows opportunities for cost saving, value engineering, and phasing. Flexibility is retained to allow tendering to be phased and to include options that depending on the pricing will allow for some or all of the work to proceed, deferring items if necessary.

PURPOSE

The purpose of this report is to provide Council with a status update on the new works yard and to seek funding approval for components outside of the Capital Plan.

BACKGROUND

· In 1998 a review of the Engineering Yards was completed, which led to the development of the 2000 - 2002 Capital Plan submission.

· In 2000, the 2000 - 2002 Capital Plan approved $15.928 million for the new yard with two areas to be funded outside of the Capital Plan. Based on the plan at the time, it was projected to fund the garage facility (estimated at $1.56 million) from the Equipment Plant Account and to fund Sanitation facilities (estimated at $1.1 million) from the Solid Waste Utility for a total estimated project cost of $18.588 million.

· The first phase of the yard design is now complete and has established the overall building and site layout for the works yard. This plan is based on extensive interviews and workshops with the superintendents, foremen and staff. The first phase included a detailed vehicle inventory, user space needs, draft outlinespecifications, special equipment requirements, and updated cost estimates.

DISCUSSION

Works Yard Program Changes

The new yard is planned to be a replacement for the Cambie Yard and three satellite yards. The new yard will include facilities for Electrical, Traffic, Parking, Streets, Sanitation, Sewers, and Waterworks Operations, Equipment Services, and general facilities including administration offices, lockers, showers, parking and a consolidated stores warehouse.

Since the Capital Plan was prepared, there have been a number of changes in scope affecting the yard program. Apartment recycling has been deleted from the program and is planned for relocation with the Kent Yard. Streets construction crews and Equipment Services (garage facility, fuel station, vehicle wash) have been added or increased in scope. The following is a discussion of these changes.

Streets Operations
Streets crews traditionally have been based in the field; however, they are facing increased difficulty in locating equipment, materials and trailers on streets in the neighbourhoods where they work. This has become a growing source of citizen complaints. The incidents of vandalism and theft of material and equipment are also increasing. The space provided for Streets Operations has increased from the original Capital Plan submission to allow for construction and paving crews to operate out of the yard. The impact of this is more staff and a larger vehicle fleet operating out of the new yard. Locating the streets construction crew in the yard will also provide some efficiencies in capital facilities by co-locating maintenance and construction crews.

Equipment Services Facilities
Equipment Services facilities consist of three components: a garage facility and buildings, a fuel station, and vehicle washing equipment. All three components are replacements for what now exists in Cambie Yard. Equipment Services facilities operate as business units, giving competitive service with costs charged to the users.

· Garage Facilities
The size of the fleet to be at the new yard has increased since the Capital Plan. The garage facilities proposed will be required to service approximately 350 vehicles and pieces of heavy equipment operating out of the new yard and another 450 from satellite locations. Overall, the garage facilities will handle approximately 6500vehicle services per year, including the police fleet. The proposed facilities will allow the Equipment Branch to provide the level of service expected from its customers and still be able to provide it at competitive rates.

· Fuel Station
At the time the Capital Plan was prepared, it was anticipated that vehicles based from the new yard would use the fuel pumps at Evans Yard through a private rail crossing. Unfortunately, this has not been accepted by Via Rail due to their operational requirements. The new yard is expected to dispense approximately 2.3 million litres of fuel (gasoline, diesel and propane) per year (approx. 6300 litres per day). A cost review has been done for a new fuel station at the new works yard and given the size of fleet (cars, trucks and equipment), it is beneficial and competitive to install a new station.

· Vehicle Washing Equipment
In the Capital Plan submission, it was proposed to relocate the existing car wash to the new yard. The existing car wash is at the end of its useful life and is in need of replacement. It is proposed to replace this at the time of the move to the new yard.

Development Cost Levies
Both a Citywide DCL By-law (full rate) and a False Creek Flats DCL By-law (nominal rate) are now in place and apply to the yard site. The By-laws, guided by the Vancouver Charter, do not provide exemptions to Civic Facilities. While this allows for consistent application of the By-law, it also requires that the City fund the DCL for its own projects. The Financing Growth project team is addressing this issue as part of their review and has acknowledged that the collection of DCLs from civic facilities is inefficient and would like to eliminate this requirement. This has already been acknowledged as part of the area-specific False Creek Flats DCL By-law which incorporates a nominal rate for the works yard. DCLs were not included in the original estimate and at this time are unfunded.

Table 1 summarizes the overall changes in the works yard program and the estimated cost.

Table 1 - Summary of Program Changes

	Total
Original Plan	$18,588,000
Reduction in Scope
Recycling, Solid Waste Utility	$(1,100,000)
Addition in Scope
Sewer & Water	$377,000
Streets & Sanitation	$1,066,000
Equipment Services	$3,069,000
Total	$22,000,000
Net Change	$3,412,000

There have been a number of changes in the scope affecting the yard program and the cost estimate. The overall impact of these changes is an increase of $3.4 million in the estimated cost of the new yard from $18.588 million to $22 million. This report proposes a variety of mechanisms to deal with the funding shortfall and are discussed in the Financial section with recommended sources for the additional funding required.

FINANCIAL IMPLICATIONS

The following table summarizes the additional funding required and the recommended source of funds, followed by a discussion of each item.

Table 2 Funding Source

	Funding Source	Funding Amount
	Approved Funds
1	Approved Capital Plan -2000 Capital Budget $3,000,000 -2001 Capital Budget $6,000,000 -2002 Capital Budget $6,928,000 (to be submitted)	$15,928,000
2	Approved Land Sale	$250,000
	Recommended for Approval
3	Waterworks 1998 Basic Capital, "Waterworks Operations Building" order 30000452	$273,000
4	Sewer Capital contained in order group CA2ED11C06 order 30003558	$104,000
	Equipment Services
5	Garage Facility ($3,782,000) -Equipment Plant Account loan to be repaid by a surcharge, without offset, of up to $1.59 on the equipment composite rate for 10 years -Capital Financing Fund loan to be repaid by offsets within the Engineering Services Budgets over 10 years;	$1,560,000 $2,222,000
6	Fuel Station Capital Financing Fund loan to be repaid by a $0.03 fuel surcharge over five years beginning in 2006	$647,000
7	Vehicle Washing System Equipment Plant Account loan to be repaid by continuation of the current user charges over 10 years	$200,000
	Total Funding	$21,184,000
	Total Cost Estimate	$22,000,000
	Shortfall In Capital Plan	$580,000
8	Shortfall for DCLs	$236,000
9	Total Shortfall	$816,000

Item 1 - Capital Plan
The current Capital Plan has approved $15.928 million for the construction of a new yard to replace Cambie Yard.

Item 2 Land Sale
As part of securing the long term road network for the False Creek Flats, Council has approved a land exchange of a portion of the engineering yard with an adjacent owner. This has resulted in a net return of approximately $250,000 to the project.

Items 3 & 4 - Waterworks and Sewers Funding
The waterworks and sewers programs are utilities funded outside of the Capital Plan. It is recommended to fund their corresponding component of the yard through reallocation of existing capital budgets. Both the waterworks and sewers funding noted are from existing funds and will therefore have no impact on the utility rates.

Item 5 - Garage Facility ($3,782,000):
Previously, $1.56 million in funding was allocated from the Equipment Plant Account. An additional $2.222 million will need to be financed as well. Recommended financing for the garage is as follows:
· Equipment Plant Account loan ($1.56 million): repayment will be approximately $222,000 per year ($1.59 per hour surcharge on the garage composite rate, without offset, net maintenance budget cost increase of 1.4%).
· Capital Financing Fund loan ($2.222 million): repayment will be approximately $302,000 per year. This will be funded by $100,000 from an existing surcharge on the composite rate which expires in 2003, and the remaining $202,000 will be funded from savings within the Engineering Services Budget. This will largely come through operational efficiencies within the garage operations.

Item 6 - Fuel Station
Funding of the fuel station will be provided by a loan of $647,000 from the Capital Financing Fund and will be repaid by a $0.03 per litre surcharge (annual cost $154,000). It is proposed to collect this over five years beginning once the current fuel management system surcharge is complete in 2006. This will result in no net change in the fuel station overhead and therefore no increase to the operating budget.

Item 7 - Car Wash
Funding of $200,000 for the car wash equipment will be provided by the Plan Account for equipment replacement repaid over 10 years. The loan will be repaid by the continuation of user charges (approximately $2.85 per wash, annual cost $28,000) as is currently done for the existing vehicle wash (unit B2525) The total wash charge, including supplies and operating costs, will be approximately $3.85 per wash.

Item 8 - Development Cost Levies
DCLs are estimated to be $236,000 and are due at the issuance of a building permit. The General Manager of Engineering Services and the Director of Finance will report back with funding options prior to the funds being due if the Financing Growth team has not resolved the issue by this time.

Item 9 - Shortfall
To try and stay within the original plan, the works yard program has undergone a peer review and a budget review exercise to arrive at the current program. This resulted in significant revisions and cuts to the program. Based on the funding proposed, there will still be a shortfall of approximately $580,000 plus $236,000 for DCLs. To help address this, it is intended to retain close control during design and construction.

The intent is to use construction management to build the yard rather than one general tender. Involving a construction manager early in the design process allows opportunities for cost saving through constructability input, material selection, detailed costing, value engineering, and phasing. Tendering will be phased and include options that depending on the pricing will allow for some or all of the work to proceed, deferring items if necessary. Flexibility will be retained to closely monitor costs during tendering and adjust the program as necessary.

There may be opportunities in the detailed design stage to reduce long term operating costs by making additional capital expenditures during the initial constructions (ie energy efficient heating and lighting). If these opportunities materialize, staff will report back on the business case and any funding requirements.

CONCLUSION

Replacement of the Cambie Works Yard has been in the works for a number of years. Design has now progressed which has refined the scope and updated the cost estimates allowing the balance of the funding to be identified. Funding sources and loan repayments have been identified to complete the yard funding.

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(c) 1998 City of Vancouver