ADMINISTRATIVE REPORT

                                           Date: June 3, 1997
                                           IRTS #:  CC 96165
                                           C.C. File No. 5801


   TO:       Standing Committee on City Services and Budgets

   FROM:     General Manager of Engineering Services

   SUBJECT:  Budget Approval and Financing Plan for the New Asphalt Plant,
             Aggregate Handling Facility, and Materials Testing Laboratory


   RECOMMENDATION

        A.   THAT Council approve an expenditure of up to $250,000 from the
             Property Endowment Fund (PEF) for costs associated with the
             purchase of the 900 East Kent Avenue Site (900 Kent).  Once
             the final costs are known, they will be added to the purchase
             price and pro-rated to the PEF and Engineering Services.

        B.   THAT Council approve the purchase by Engineering Services of
             approximately six acres of the western parcel, Block P, of 900
             Kent at a cost of $4.1 million, with funding to be provided by
             the sales of Sterling Shipyard and Commissioner Street Yard
             ($2.1 million) and of  Stainsbury Yard ($2.0 million) to the
             PEF.

        C.   THAT Council, based on the Preliminary Design and Class 'B'
             Estimate, approve a project budget of $13,306,000 for the
             construction and commissioning of an Aggregate Handling and
             Asphalt Plant operation, at 900 Kent.

        D.   THAT Council, based on a Class  D  Estimate, approve a budget
             of $1,190,000 for a Materials Testing Laboratory, to be
             constructed at 900 Kent.

        E.   THAT Council authorize the General Manager of Engineering
             Services to instruct Westmar Consultants Inc., (the
             Consultant), to proceed with Phases II and III of the
             Consultant Services Contract - Final Design, General
             Engineering, Inspection and Record Services, valued at
             $834,000.

        F.   THAT Council approve funding of $152,000 for a temporary 
             Civil Engineer II to manage the design, construction and
             commissioning of the project.

        G.   THAT Council approve financing for the Asphalt/Aggregate
             Plant, including Consultant Services, Material Testing Lab and
             Project Manager, as follows:

             Capital Financing Fund Loan             $11,282,000 
             Truck Plant Account                       4,000,000 
             Streets Capital Budget                      150,000
             Waterworks (Fire Protection) Budget          50,000

        H.   THAT Council authorize the General Manager of Engineering
             Services to call for proposals for a public/private
             partnership for a waste concrete and asphalt
             crushing/recycling pilot project.


   COUNCIL POLICY

   In 1979, Council provided for the relocation of the water-based
   aggregate operation and asphalt plant in Cambie Yard, by securing the
   former Sterling Shipyard property on Burrard Inlet.

   On January 16, 1996, Council approved the relocation of the Aggregate
   Handling and Asphalt Plant, with the addition of a Concrete/Asphalt
   Recycling Operation, to an undetermined site on the Fraser River. 
   Estimated land costs of the new site were to be obtained primarily from
   the sale of the Sterling and Commissioner Yards.

   On February 27, 1996, Council approved the award of a three phase
   Consultant Services Contract and authorized the consultant to proceed
   with Phase I - Preliminary Design and Class  B  Estimate.

   On August 1, 1996, Council approved the acquisition of the property at
   900 Kent as the site for the primary use as an Aggregate Handling and
   Asphalt Plant Operation.


   PURPOSE

   This report seeks Council approval for the acquisition by Engineering
   Services of a portion of 900 Kent in exchange for the estimated proceeds
   on the sale of existing Engineering Services Assets, and development
   thereon of an asphalt/aggregate facility at a cost of $13,306,000. In
   addition, funding is recommended for: the Consultant to proceed with
   final design, general engineering and inspection services, at a cost of
   $834,000; a Materials Testing Laboratory, at a cost of $1,190,000; and a
   Project Manager.

   This report further requests Council s approval of a financing plan and
   proposes the sale of Engineering land assets necessary to acquire the
   land at 900 Kent.


   SUMMARY

   The existing asphalt and aggregate operations have served the City well
   for many years, providing the necessary products at a lower cost than
   private sources.  With the deterioration of the existing asphalt plant
   and short term site tenure at the Cambie Yard, it is necessary that the
   City s asphalt and aggregate operation be replaced and relocated.    

   Although saving about $13 million, net present value, over 25 years,
   compared to private asphalt/aggregate supply, the new yard will result
   in higher costs for asphalt and aggregate currently supplied to City
   works.  This increase is mainly due to the costs of capital financing a
   new plant and site.
     
   The materials testing lab will be replaced and will continue to offer
   the City savings over private testing and inspection services.  Although
   Council previously approved a recycling component to the project, the
   General Manager of Engineering Services believes the economics of this
   operation are not yet clear and intends to publicly request proposals
   for a crushing/recycling pilot project, and report back with the
   results.  The Consultant will continue engineering design work, which
   should allow the new facilities to be completed and in operation in
   1998. 
    

   BACKGROUND

   The City's Cambie Yard facility has long provided aggregate handling and
   asphalt supply that has efficiently and effectively supported the City's
   operations; however, the deteriorating asphalt plant now requires
   replacement and development pressures in False Creek require the City to
   find a new site.  A new yard proposed on the Fraser River at 900 Kent
   can accommodate the water-based activities from the Cambie Yard.  At 900
   Kent, operations would include handling of 450,000 tonnes of aggregate
   delivered by barge and manufacture of approximately 100,000 tonnes per
   year of asphalt. 

   Council previously approved the relocation of the asphalt/aggregate
   facility based on a business case that showed a City operation offered
   best value when compared to private supply.  The City owned and operated
   facility continues to be the most economical option relative to private
   supply based on the review of a formal proposal from Columbia Bitulithic
   Ltd.(Columbia), to provide asphalt, aggregate and crushing/recycling. 
   This proposal is discussed later in the report.


   DISCUSSION

   Preliminary Design

   Council previously approved a project budget based on a conceptual
   design for a generic site.  This design included a crushing/recycling
   operation.  The Consultant has now completed the Preliminary Design and
   has identified the Class  B  Estimate for the design, construction and
   commissioning of an asphalt/aggregate operation, and a
   crushing/recycling facility.  These estimates compare as follows:

   - Conceptual Design (Class  D  Estimate)          $13.3 million
   - Preliminary Design (Class  B  Estimate)         $15.5 million
   (Although the current recommendation does not include
   crushing/recycling, to be consistent with the previous report, both the
   above estimates do).

   The cost to add a Materials Testing Laboratory is estimated at 
   $1,190,000 and was not included in either estimate.

   Engineering is concerned that the estimated costs have increased by
   about 17%, although this is not uncommon as one proceeds from conceptual
   design and Class  D  Estimate, to a site specific, detailed preliminary
   design and Class  B  Estimate.  The increased  costs were noted in the
   following areas: seismic ground improvements, state of the art
   wastewater recycling system, site filling to meet the 200 year flood
   level elevation and foreshore protection and dredging.

   It should be noted for the asphalt/aggregate business case, that the
   increased capital cost is more than offset by the lower land cost at 900
   Kent and the lower financing costs for the required capital.

   In the spring of 1996, the Consultant prepared a preliminary design and
   Class  B  Estimate for a new Asphalt/Aggregate/Construction Material
   Recycling facility at the PEF owned site near the south foot of Main
   Street on the Fraser River.  However, this site was replaced by a
   superior site, when, on August 1, 1996, Council approved the acquisition
   of 900 Kent.  This latest acquisition required that a second preliminary
   design and class  B  estimate be prepared for the new site.  As much of
   the design is site specific, an additional design cost of about $220,000
   was incurred.

   900 East Kent Avenue Site

   900 Kent consists of two parcels, approximately 11.3 acres in western
   Lot P, and about 5.15 acres in Lot O.  Engineering proposes to purchase
   six acres of the site for use as an asphalt/aggregate facility with
   proceeds from the sale of other Engineering land assets.  The remainder
   of Lot P and Lot O will be held in the PEF for future City use,
   development or disposition.  

   The City has purchased the 16.45 acre, 900 Kent site at a purchase price
   of $10,400,000 plus applicable GST.  The soil remediation and
   groundwater concerns have been resolved with the British Columbia
   Ministry of Environment, Lands and Parks (BCMOELP), issuing a
   Certificate of Compliance on February 25, 1997.  However, an expenditure
   of up to $250,000 is required to resolve associated concerns with the
   purchase.  This expenditure would fund a survey of the entire site; work
   done by an environmental consultant to ensure that environmental
   concerns were addressed; site investigation to confirm that the site is
   appropriate for the City s intended uses and $50,000 adjustment on
   closing related to a tax issue.  Other costs could include the removal
   of abandoned equipment and the removal of small amounts of hazardous
   waste remaining on the site in various sumps and containers.  It is
   recommended that these costs be added to the purchase price and
   pro-rated to the PEF and Engineering Services.

   Advantages of this new site include:

   1.   Lower cost;              Kent; approx $700,000/acre
                                 Main; $750,000 to $900,000/acre

   2.   Larger site, including greater riverfront - allows for a better
        functional layout, with expansion potential or addition of
        associated uses; 

   3.   An existing warehouse can be retained;

   4.   An existing barge loading facility (Lot O) may be upgraded and
        possibly used to remove construction waste;

   5.   Rail access to the site for possible street car maintenance or a
        future solid waste removal operation; and,

   6.   Future potential - such uses as abandoned auto lot; sorting/ocean
        disposal operation; or household material recycling facility.
         
   Asphalt Plant and Aggregate Operation

   Further to the previous economic analysis justifying the continuation of
   a City owned and operated asphalt plant and aggregate operation, staff
   received a proposal from Columbia to provide asphalt and
   crushing/recycling to meet the City s requirements.  An updated economic
   analysis shows that Columbia s proposed asphalt supply is more costly
   than a City operation.  The analysis is available in a report
    Evaluation of Economics of Columbia Bitulithic Partnership Proposal 
   (both the proposal and this report are on file with the General Manager
   of Engineering Services).  The current analysis continues to show that
   when comparing all costs including land, interest, capital construction,
   operating, taxes, etc. that the City option is superior.  Although the
   capital cost estimate has increased since the last review, the land cost
   has gone down and the financing rate on borrowing has dropped to be
   comparable with market rates, resulting in a City run facility becoming
   even more attractive. 

   Numerous reviews of the City s annual purchase of aggregate through a
   public tender process clearly indicate best value to the City.  The
   current volumes of about 450,000 tonnes per year used for City
   operations will continue into the future, given the requirements for
   infrastructure construction and maintenance.  The installation of new
   aggregate handling equipment at 900 Kent will improve the efficiency of
   this operation.

   There are indirect costs and other concerns associated with a private
   aggregate and asphalt supply that favour a City operated facility. 
   These are:

   a) There is limited competition in the asphalt business today.  A City
   plant retains an element of competition in the market that reduces the
   potential for higher prices from a single source supply and provides a
   bench mark for municipalities to measure asphalt costs against;

   b) Labour disruption at the private site would require the City to pay
   more for alternate sources of supply;

   c) A long term joint venture limits the City s ability to explore new
   opportunities in relation to changes in technology, material or
   regulation without negotiation to the agreement;

   d) There would be significant additional truck traffic through a
   facility serving both private and City needs that would delay City
   forces from getting supply on demand and result in increased costs; 

   e) The City would lose the flexibility or pay a premium to experiment
   with latest research in asphalt technology, such as using rubber asphalt
   made from tires; and

   f) There are potential extra costs for weekend work or work conducted
   outside normal working hours. 
     
   The new asphalt/aggregate operation is projected to save the City
   approximately $13 million, net present value, over 25 years.  The new
   asphalt plant alone will save the City about 8.2 million, (about $5.00
   per tonne of asphalt produced), compared to private supply of asphalt.

   Crushing/Recycling

   As previously reported, there are major benefits to an asphalt/concrete
   recycling operation, as it not only can save money, it is an
   environmentally sound business that reuses materials, reduces space
   demand at the landfill and reduces truck traffic in the region.   

   A report on crushing/recycling, (on file with the General Manager of
   Engineering Services), indicates that the unit costs, if the City were
   to operate a crushing operation, would be similar to those proposed by
   Columbia.  This report also indicates that the unit costs are sensitive
   to the amount of waste asphalt and concrete being recycled.  Without
   being able to accurately establish the volume of recyclable material
   produced by City crews and with limited experience in this area, staff
   believe a pilot project in the form of a partnering type arrangement may
   be appropriate. 

   Therefore, the General Manager of Engineering Services recommends a call
   for proposals for a pilot project, likely for a two year 
   period, involving a public/private partnership, that will recycle an
   estimated 220,000 tonnes per year of broken concrete and asphalt from
   City construction projects.  At 900 Kent, there also exists the
   potential to sort construction excavation materials and barge, possibly
   using the existing ramp, clean non-structural fill materials for reuse
   elsewhere in the region and this will be examined during the pilot
   project.
   Materials Testing Laboratory

   In conjunction with the relocation of the asphalt/aggregate facility,
   Council is requested to approve a $1,190,000 expenditure to relocate the
   materials testing lab from Cambie Yard to 900 Kent.  As with the asphalt
   plant, the new lab would replace our existing facility at Cambie Yard,
   which is now well beyond its design life and requires upgrading. 

   The laboratory provides timely inspection and material testing services
   to client branches, including:
        - quality control of City asphalt production
        - quality assurance of aggregate purchases
        - backfill compaction testing
        - ready mix concrete testing
        - soils investigation
        - pavement inspection
        - materials research
        - construction product evaluation

   It is estimated that a new City owned and operated materials testing lab
   will be more efficient and accurate and result in a yearly savings of
   $130,000 per year over having this work being done privately.  A
   business analysis comparison with outside laboratories has identified
   this savings and the analysis is on file with the General Manager of
   Engineering Services.  The analysis shows that the speed of response,
   proximity to operations, and no GST or profit requirement allow the City
   to be extremely competitive and offer excellent service to City
   operations.  By increasing our current testing rates to market rates,
   the lab operation can repay the initial capital costs in 5.6 years. 

   Staffing/Consultant Resources
    
   To date, this project has been managed internally on a part time basis
   by various City staff.  To manage the implementation of the project, a
   temporary full time CE II is required for a two year period, at a cost
   of $152,000.  This cost includes $4,000 for office furniture and
   computer resources in order to establish a project office.

   Staff are satisfied with the preliminary design work completed to date
   by Westmar Consultants Inc. and recommend Council approve them 
   to proceed with Phases II & III at a cost of $834,000.  Under Phase II,
   the Consultant will complete final design and Class  A  Estimates,
   including the design, supply, installation and procurement packages for
   the asphalt plant, conveyor system, barge berth, materials testing lab,
   and site services.  General engineering and inspection services during
   construction, including record services, will be provided under
   Phase III.  

   Tenders for demolition of the existing site buildings will be advertised
   next month with site demolition beginning in August.  Ground
   improvements and marine works would begin in September and the new yard
   should be operational in 1998.

   Environmental Benefits

   This new facility will provide substantial environmental benefits. 
   State of the art environmental control and protection technologies have
   been incorporated in the design of the new asphalt plant and aggregate
   handling facility to minimize the asphalt plant air emissions and
   wastewater discharges.  In addition to the pollution control systems,
    best management practices  have been used in the design to minimize the
   creation of pollution.

   The design calls for a $710,000 expenditure for a closed loop wastewater
   recycling operation, using this recycled water for truck washing,  dust
   control and production area cleaning.  This exceeds existing standards
   by meeting the  best management practices  and will make the City a
   leader in applying these latest environmental guidelines. The Consultant
   anticipates these practices will become BCMOELP requirements in the near
   future and will affect the costs of existing materials handling
   operations along the river.

   The location of the new site should result in reduced truck traffic. 
   Trucks returning from the landfill will be able to stop at this new site
   to be loaded with aggregate or asphalt.  Furthermore, if the new site or
   a nearby location can be developed to accept waste, truck traffic would
   be able to travel loaded both to and from their job sites.  The decrease
   in truck traffic results in significant environmental benefits,
   including reduced fuel consumption and reduced noise.  These positive
   environmental impacts will be considered when evaluating the
   crushing/recycling proposals.

   Financial Implications

   The General Manager of Engineering Services recommends that the proceeds
   from the sale of the Sterling Shipyard, Commissioner Yard and Stainsbury
   Yard, be used to purchase approximately six acres of  900 Kent. 

   Cost of site:  (6 acres @ approx. $700,000/acre)  $4.1 million

   Funded from disposition of:
        Sterling Shipyard and Commissioner Yard      $2.1 million
        Stainsbury Yard                               2.0 million

   The Manger of Real Estate Services has reviewed this transaction and
   believes it to represent fair market value for the assets.

   The current economic analysis of the asphalt plant and aggregate
   operation includes interest, land and taxes and amortization of capital
   costs over 25 years.  The analysis continues to show major savings to
   the City by retaining the asphalt/aggregate operations.  The Finance
   Department has reviewed the revised business analysis and supports the
   conclusions as identified in this report.

   The asphalt/aggregate operation will retain three existing full time
   staff and will result in a savings of approximately $13 million, net
   present value, over 25 years.

   Summary of Expenditures and Funding

   Proposed Expenditures
        - Asphalt/Aggregate Facility                 $13,306,000
        - Material Testing Lab                         1,190,000
        - Engineering Consultant Services                834,000
        - Project Manager                                152,000
                                           Total     $15,482,000

   Proposed Funding
        - Capital Financing Fund                     $11,282,000
        - Truck Plant Reserve                          4,000,000
        - Streets Capital Budget (Lab)                   150,000
        - Waterworks Account (Ramp)                       50,000
                                           Total     $15,482,000


   CONCLUSION 

   The General Manager of Engineering Services and the Director of Finance
   believe that the proposed relocation and redevelopment of a City owned
   asphalt/aggregate operation and materials testing lab offers the best
   value to the City based on the current operations and market conditions.



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