HomeMy WebLinkAbout2022-08-18 SpecialClar*wn
Special Special Council Agenda
Post-MeetingAgenda
Date: August 18, 2022
Time: 10:00 AM
Location: Microsoft Teams
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The Revised Agenda will be published on Friday after 3:30 p.m. Late items added or a change to
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Pages
1. Call to Order
2. Moment of Reflection
3. Land Acknowledgement Statement
4. Declaration of Interest
5. Staff Reports
5.1. FSD-033-22 - Delegated Authority to Fund Outstanding Capital Projects 3
*6. Closed Session
*6.1. Confidential Verbal Update by Mary -Anne Dempster, CAO, Regarding a
Matter that Deals with Labour Relations or Employee Negotiations
7. Confirming By-law
8. Adjournment
Page 2
Clarftwn
Staff Report
If this information is required in an alternate accessible format, please contact the Accessibility
Coordinator at 905-623-3379 ext. 2131.
Report To: Council
Date of Meeting: August 18, 2022 Report Number: FSD-033-22
Submitted By: Trevor Pinn, Deputy CAO/Treasurer
Reviewed By: Mary -Anne Dempster, CAO Resolution#:
File Number: By-law Number:
Report Subject: Delegated Authority to Fund Outstanding Capital Projects
Recommendations:
1. That, Report FSD-033-22 and any related delegations or communication items, be
received;
2. That, the Deputy CAO/Treasurer is authorized to transfer the remaining balances in
the Impact/Escrow Reserve Fund and the Clarington Station A Reserve Fund to the
Capital Works Reserve Fund and close the effected reserve funds;
3. That, notwithstanding Policy G5 — Capital Project Over expenditures, the CAO be
delegated the authority to approve additional funding as needed for outstanding
capital projects, until November 14, 2022;
4. That, all interested parties listed in Report FSD-033-22 and any delegations be
advised of Council's decision.
Page 3
Municipality of Clarington
Report FSD-033-22
Report Overview
Page 2
On February 14, 2022, the 2022 Operating and Capital Budgets were approved by Council.
Since that time, the Municipality has seen significant inflationary pressures on many
operating and capital projects. These increased costs have resulted in many bid solicitations
coming back above the budgeted amount.
It is expected that Council will enter into the restricted activities legislation on August 19,
2022, and therefore the ability to obtain additional funding for projects would be limited to
emergency situations or areas where authority has been delegated to staff. Staff are looking
to delegate the authority for additional funding, prior to the start of the Restricted Acts
Period, to allow priority capital projects and key operating expenditures to be able to proceed
in the latter part of the year.
1. Background
Economic Update
1.1 This year, we have seen significant inflationary pressures on capital projects and
operating expenses that far exceeded our expectations when the 2022 Budget was
prepared.
1.2 According to Statistics Canada, the Building Construction Price Index (BCPI) for non-
residential builds for Toronto increased 17.0 percent from June 2021 to June 2022. The
index was set in 2017 as the baseline, therefore goods costing $100 in 2017 would now
cost $140.30 over the five-year period. Given our geographic proximity to Toronto, this
is the most reasonable index to use.
1.3 Similarly, the BCPI for residential buildings for the Toronto area increased 26.5 percent
from June 2021 to June 2022. For clarity, if costs in 2017 were $100 they would now be
$173 as a result of the increase to the BCPI over the past five years.
1.4 While the BCPI is an indicator for inflation, it would not include a number of the types of
capital projects that we would be involved with (for example road and park construction).
These costs could vary more dramatically with the cost of certain commodities, such as
oil.
1.5 According to Statistics Canada, the Raw Materials Price Index (RMPI) increased 32.4
percent from June 2021 to June 2022. Within this number, crude energy products saw a
72.4 percent increase. Similarly, wood, pulpwood, natural rubber and other forestry
products saw an increase of 25.6 percent over the same period of time. These costs
impact our road repair costs (through asphalt and other sealants), building repair costs
(wood, drywall), and operating costs.
Page 4
Municipality of Clarington
Report FSD-033-22
Page 3
1.6 The Industrial Product Price Index (IPPI) increased 14.3 percent over the past year.
Energy and petroleum products had an increase of 82.8 percent, lumber and wood
decreased 27.7 percent, fabricated metal products and construction material increased
24.0 percent.
1.7 The following chart highlights, using the 2017 base year for Statistics Canada, the
inflationary impact over the past five years. Goods on average costing $100 in 2017
would now cost on average $157 (or a 57 percent increase). Most of this increase is in
the past two years.
Inflationary Impact Based on Statistics Canada Base Year (2017)
$200.00
$180.00
$160.00
$140.00
$120.00
$100.00
$80.00
$60.00
$40.00
$20.00
2018 2019 2020 2021
■ BCPI - Residential ■ BCPI - Non -Residential
1.8 The following chart shows the annual change as a percentage for 2018 to 2022 for the
BCPI, the Raw Materials Price Index (RMPI) and the CPI. While the average change for
the four indices is 9.2 percent, the average levy increase has been 2.3 percent.
Page 5
Municipality of Clarington
Report FSD-033-22
Annual Inflationary Index Year over Year Change
June 2018 to June 2022
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
2C
-10.00%
-20.00%
22
BCPI -Residential -BCPI - Non -Residential -RMIDI CPI -All Items Municipal Levy Change
Page 4
1.9 These soaring costs have resulted in many of our bid solicitations coming back above
the budgeted amount. This results in a scope change, which could result in a completed
project that doesn't meet all the needs of the Municipality, resulting in inefficiencies or
added costs in the future.
1.10 While it is expected that annual increases will slow, it is not expected at this time that
the overall costs will decrease (i.e., deflation). It is therefore necessary for the
Municipality to increase the available funding for these projects.
Restricted Activities Legislation
1.11 In any other year, Staff would bring reports to Council in September (or subsequent
meetings) requesting additional funding to either complete the project award or have
sufficient funds in place prior to issuing the document. In 2022, the Municipality is
holding its general election. The Municipal Act, 2001 provides that Councils meeting
certain criteria, may not make expenditures or other liabilities exceeding $50,000 in
value unless the expenditure was included in the last adopted budget, the "lame duck
provisions".
1.12 It is expected that Council will enter the restricted activities legislation on August 19,
2022, and therefore the ability to obtain additional funding for projects would be limited
to emergency situations or areas where authority has been delegated to staff.
Page 6
Municipality of Clarington Page 5
Report FSD-033-22
1.13 Given the escalating costs of goods, and the restricted activities period, if authority for
funding is not delegated it is expected that many of the capital projects currently
underway or planned for the fall will have to be delayed to 2023. This could result in
changes to service levels, increased costs to complete the work in 2023 due to inflation,
as well as potential reputational risk to the Municipality for issuing bid solicitation without
the ability to follow through.
1.14 Staff recommend that Council provide delegated authority for additional funding, prior to
the start of the Restricted Acts Period, to allow priority capital projects and key operating
expenditures to be able to proceed in the latter part of the year.
2. Capital Projects For Consideration
Capital Over Expenditure Policy (G5)
2.1 For each Council approved capital project, the Capital Over Expenditures Policy (G5)
establishes the authorization limits that Department Heads may approve over that
budgeted value. The parameters are outlined below.
Up to $250,000
$250,000 to $2,000,000
Over $2,000,000
Additional Expenditure Limit
LL-
$25,000
$25,000 or the lesser of 7% of the valuE
$100,000
Lesser of 5% of the value or $150,000
2.2 When a project exceeds the above limits, and the value of the overage is greater than or
equal to $100,000, the policy requires the applicable department to report to Council for
approval of the additional commitment and funding source.
Capital Projects at Risk of Exceeding Budgeted Value
2.2 The following table outlines the projects that are at risk of exceeding the Council
approved budgeted value:
Page 7
Municipality of Clarington
Report FSD-033-22
Project Description
Various Court Replacements
Old Scugog Road Reconstruction & Millstream
Lane Rehabilitation
Stormwater Facility Maintenance Master Plan and
Facility Needs
Pedestrian Crossovers (four locations)
Surface Asphalt Contract (seven locations)
Parking Lot Rehabilitation (two locations)
Hill Street Rehabilitation
Various Parks Improvements (five locations)
SCA Tennis Courts
Brown Street Reconstruction
Soper Creek Trail — Phase 3
Brookhill Parkette
Awaiting
award
Awaiting
award
Out for tender
Tender in
preparation
Tender in
preparation
Tender in
preparation
Tender in
preparation
Tender in
preparation
Tender in
preparation
Tender in
preparation
Tender in
preparation
Tender in
preparation
Page 6
300,000
1,433,397
75,000
160,000
693,000
456,553
1,000,000
655,000
425,000
1,201,754
325,000
300,000
Municipality of Clarington
Report FSD-033-22
3. Concurrence
Page 7
This report has been reviewed by the Director of Public Works who concurs with the
recommendations.
4. Financial Considerations
4.1 The estimated available balance in the Tax Rate Stabilization Account is $8,777,713
which includes committed funds of $1,159,600 (primarily for Whistle Cessation and the
Clarington Hospice). In 2022, $2,000,000 has been reallocated to other reserve funds in
accordance with Council direction to "rebalance" the reserve funds across various
capital replacement reserve funds.
4.2 Staff would further suggest that the following reserve funds could be reallocated to other
reserve funds, as they no longer serve the purpose they were originally created for:
$968,793
4.3 It is recommended that these funds be transferred to the Municipal Capital Works
Reserve Fund. This reserve fund is not specific to any one type of asset or department
and could be considered the capital version of the Tax Rate Stabilization Reserve Fund,
the purpose being to smooth tax levies and provide a source of funding for unexpected
needs.
5. Conclusion
It is respectfully recommended that the Deputy CAO/Treasurer be authorized to transfer
the remaining balances in the Impact/Escrow Reserve Fund and the Clarington Station
A Reserve Fund to the Capital Works Reserve Fund and close the effected reserve
funds.
It is respectfully recommended that the CAO be delegated the authority to approve
additional funding as needed for outstanding capital projects, until November 14, 2022.
Staff Contact: Trevor Pinn, CPA, CA, Deputy CAO/Treasurer, 905-623-3379 x2602 or
tpinn@clarington.net.
Page 9
Municipality of Clarington
Report FSD-033-22
Attachments:
Not Applicable
Interested Parties:
Page 8
There are no interested parties to be notified of Council's decision.
Page 10