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HomeMy WebLinkAboutEGD-009-19Clarftwn Engineering Services Report If this information is required in an alternate accessible format, please contact the Accessibility Coordinator at 905-623-3379 ext. 2131. Report To: General Government Committee Date of Meeting: May 6, 2019 Report Number: EGD -009-19 Resolution: GG -243-19 File Number: R.40.14 By-law Number: Report Subject: Servicing of Industrial Lands in South Courtice - Courtice Court Recommendations: 1. That Report EGD -009-19 be received; 2. That Council approve the use of the Strategic Capital Reserve Fund to pay for the local servicing costs of the properties that declare they are unable or unwilling to participate in the servicing costs at this time (estimated at $580,000); 3. That Council approve of Municipal Staff resources to assist the land owners group and their consultant to complete the Tendering and Construction phases of the local servicing; 4. That staff be authorized to prepare the funding agreement between the landowners and Clarington and that the Mayor and CAO be authorized to execute the agreement on the Municipality's behalf; 5. That staff, on behalf of the landowners, retain Hancock Engineering Services Inc. to complete servicing design east of Progress Drive; and 6. That all interested parties listed in Report EGD -009-19 and any delegations be advised of Council's decision. Municipality of Clarington Report EGD -009-19 Report Overview Page 2 This report outlines the basis for recommending the use of the Strategic Capital Reserve Fund to assist the existing land owners and businesses with the servicing of Courtice Court with local municipal sanitary sewers and watermain. Their request is for Clarington and the Region of Durham to assist with the security portion of the servicing agreement for the project and front end funding the non -participating lands' share of the works. As per the requirements of the fund, all money would be repaid to the fund including applicable interest charges. This economic development initiative is very similar to the arrangement between Clarington and the owner on Lake Road in 2013. 1. Background 1.1 Further to the memorandum provided to Council dated August 15, 2018 (Attachment 1) detailing servicing options for the South Courtice area in Clarington, staff from Durham Region and the Clarington Board of Trade held several meetings with members from a business and landowners group from the Courtice Court, Progress Drive, McKnight Road and Baseline Road area. Maps showing the servicing area for water and sanitary are provided in Attachment 2 and 3. 1.2 Considering the options that were presented in the August 15, 2018 memorandum and the desired timing of some of the new site plans and business expansions, the group felt the petition option would not meet their timeline of proceeding with the project in 2019. The group would like to work with the Municipality of Clarington to help expedite the local servicing, similar to what was done several years ago along Lake Road just west of Lambs Road. This partnership with the landowner worked very well and all of those lands have been sold and are in various stages of development. The funding provided through the Strategic Capital Reserve Fund has been completely repaid with interest. 1.3 The group expressed concerns with the current requirements of the Region of Durham's servicing agreement for water and sanitary, namely the requirement to provide securities for the project in the amount of $1,500,000 in addition to paying for the work. The group asked if Clarington and/or the Region of Durham could assist in providing the securities, or wave the security requirement. In reviewing options, Clarington and Durham staff determined that the need for the securities could be waived if Clarington would tender the work through their standard public tendering process. Any risk associated with Clarington tendering the work on the landowners behalf would be addressed with our standard requirement for bonding from the successful contractor for 100% of the labour and materials for the contract. 1.4 Although there are many businesses looking to start up, and some to expand, there are several parcels within the servicing area that are not prepared to participate at this time for various reasons. In order to assist in facilitating the servicing of these lands it was suggested that Clarington could fund the non -participating lands through the Strategic Capital Reserve Fund (SCRF) and the monies recovered once the subject land came forward for site plan approval or service connection request. After review of the request Municipality of Clarington Resort EGD -009-19 Page 3 it was determined this project would fit the criteria for use of the Strategic Capital Reserve Fund (SCRF), as outlined in the Finance Department's Report FND- 018- 12 (Attachment 4). Based on the latest discussions with the land owners group(s) this would amount to roughly $580,000. Should all the non -participating lands not come forward within 10 years, the balance of the monies owing for the initial cost of servicing these lands would be recovered from the original participating lands. This would require an agreement to be entered into between Clarington and the participating landowners. From year 10 to year 20 Clarington would continue to endeavor to collect the funds from the non -participating lands and reimburse any monies paid by the original participating land owners. 1.5 The land owners west of Courtice Court have had designs completed for both sanitary sewer and water servicing and submitted to the Region of Durham for approval. In order to provide consistency and cost savings for the project moving forward it is recommended that the same consultant retained to complete the west portion of the design be retained to complete the east section out to McKnight Road. The consulting firm currently working on the project is Hancock Engineering Services Inc. The estimated cost to complete the design, gain necessary approvals and prepare the tender and specifications for the work is $24,500 excluding HST. This cost will be paid up -front by the landowners group east of Progress Drive as part of their cost sharing agreement. In order to expedite this design, it is recommended that Clarington retain the consultant on the land owners' behalf with all costs being recovered as part of the servicing cost sharing. 2. Next Steps 2.1 Provided the proposal to address securities and provide funding for costs of non- participating lands through the Strategic Capital Reserve Fund is approved the next step would be to complete the designs, have them approved by the Region of Durham, have the landowners enter into a funding agreement with Clarington and a cost sharing agreement amongst themselves. The works would then be tendered by the Municipality of Clarington. Prior to award of the works the landowners group(s) would be required to provide the Municipality of Clarington funding for the works including design costs, permitting fees, inspection fees and the cost of construction based on the low bid tender. Once all funding is received and agreements completed the tender can be awarded and work can begin shortly thereafter. 2.2 As part of the above steps it is recommended that Council approve staff preparing the final funding agreement with the landowners and that the Mayor and CAO be authorized to execute the agreement on the Municipality of Clarington's behalf. 2.3 The Clarington Board of Trade has been dealing with the businesses in this area for a number of years and have heard the benefits that the local servicing will bring to the area allowing new businesses to move in and existing ones to grow. We anticipate the Clarington Board of Trade will provide a letter in support of this proposal, namely more and expanded businesses creating more jobs in Clarington. Municipality of Clarington Page 4 Resort EGD -009-19 3. Concurrence This report has been reviewed by the Director of Finance who concurs with the recommendations. 4. Conclusion In order to further support economic development and the ability for existing businesses to grow it is respectfully recommended that Strategic Capital Reserve Fund be used to fund the cost share of the non -participating lands to provide local sanitary and water servicing to Courtice Court. All funding will be recovered as per the requirements of the Strategic Capital Reserve Fund. Additionally it is recommended that Clarington work with the Region of Durham to modify their servicing requirements to allow Clarington to tender the works and eliminate the need for the landowners to post securities. 5. Strategic Plan Application The recommendations contained in this report conform to Priority 1 of the Strategic Plan to "Facilitate the creation of jobs, attracting of new businesses and expansion of existing businesses". Submitted by: Reviewed by: Anthony S. Cannella, Andrew C. Allison, B. Comm, LLB Director of Engineering Services CAO Staff Contact: Ron Albright, Assistant Director, x2305 or RAlbright@clarington.net Attachments: Attachment 1 — South Courtice Industrial Lands Servicing Memorandum Attachment 2 — Water Servicing Attachment 3 — Sanitary Sewer Servicing Attachment 4 — FND-018-12 Host Community Strategic Funding Policy Report List of Interested parties to be notified of Council's decision is on file in the Engineering Services Department. ciffftwig Attachment 1 to Report EGD -00 -19 Memo If this information is required in an alternate format, please contact the Accessibility Co-ordinator at 905-623-3379 ext. 2131 To: Mayor and Members of Council From: Ron Albright, P. Eng., Assistant Director, Engineering Services Date: August 15, 2018 Subject: Servicing of Industrial Lands in South Courtice and in the Technology Business Park in Bowmanville File: R.40.14 (Courtice Trunk Sanitary Sewer Project) This memorandum is provided to respond to Resolution #GG -194-18 for the April 16, 2018 General Government meeting. The request by Council was to have staff review the servicing requirements after the Region of Durham constructs the trunk sanitary sewer and feeder watermain as part of their current and future Capital Budgets. Additionally this information will be conveyed to the area businesses and landowners so they will also have a clear understanding of how the servicing will work and what they need to do in order to have their lands serviced. It should be noted that all costs provided in this memorandum are at a conceptual servicing arrangement level and further design work should be completed to assist in refining these numbers. This information was conveyed to the Courtice landowners group on May 25, 2018 at a meeting held at the office of the Clarington Board of Trade. At the meeting, Engineering staff provided a presentation outlining the estimated costs of the servicing arrangement. Staff from the Region of Durham were also present to answer any questions. South Courtice Industrial Lands This memorandum will focus mainly on the lands along McKnight Road, Courtice Court, Progress Drive, Baseline Road, Trulls Road, Marnie Drive and Cigas Road. Land in this area is mixed between developed and undeveloped with the existing developed lands functioning on private wells and sanitary sewage systems. Location of Trunk Sanitary Sewer and Watermain The alignment of the servicing that the Region will be constructing and the estimated timing is provided in Figure 1 (attached). The focus of this memorandum is Phase 1, 2 and 3. Phase 1 which runs from the Courtice Water Pollution Control Plant to just north of Energy Drive was completed several years ago as part of the Energy Drive construction. Pa The Corporation of the Municipality of Clarington 40 Temperance Street, Bowmanville ON L1 C 3A6 1905-623-3379 Attachment 1 to Report • EGD-00 -19 JIMIF ClallflgWH Memo Phase 2 will run from Phase 1 northerly under the 401 to the intersection of Courtice Court and Progress Drive then north to Baseline Road then westerly to the west side of Courtice Road. The Region of Durham has awarded this phase of construction to a contractor and work is currently underway. It is expected that this phase will be complete in late 2018/early 2019. Phase 3 of the servicing will run from the west side of Courtice Road to Trulls Road then north on Trulls to Bloor Street. There is an additional section of servicing that would eventually tie into Phase 3 which would run along Baseline Road westerly from Trulls Road to just east of Robinson Creek (just over 700 m). Timing for this section of trunk and watermain is undetermined and will be subject to timing of the trunk needs to service lands further north and west. This area is currently undergoing a secondary plan exercise and timing will be better determined after this planning work is complete. This memorandum will focus mainly on the lands between the 401 and the Canadian Pacific Railway serviced by this phase. Phase 4 of the servicing will continue north on Trulls Road from Bloor Street to Adelaide Avenue. This phase, estimated to start construction in 2021, will provided localized benefit to areas adjacent to the trunk sewer alignment but is outside the South Courtice Industrial lands so will not be discussed further in this memo. Phase 5 is the final phase in Clarington and runs along Adelaide Avenue from Trulls Road to Townline Road (Reg. Rd. 55). This primarily serves external lands to Clarington. This is forecasted to start construction in 2022. Phase 6 runs along Townline Road (Reg. Rd. 55) from Adelaide Avenue to Coldstream Drive and does not provide any servicing for Clarington based on our current urban boundaries. Phase 2 Limits Servicing Arrangements Sanitary Sewer Although the trunk sewer will be in place, it does not provide the function for local servicing. As part of the design the Region has provided a connection location on the south side of Courtice Court at the intersection of Progress Drive. In order to service properties on Courtice Court, Progress Drive, McKnight Road and Baseline Road a local sewer must be provided. Ideally this would be done in a collaborative effort with all landowners participating to make it more affordable but there is nothing in place that would mandate participation if these works were initiated by the owners. We have worked out a rough cost estimate for the water and sanitary servicing as well as an estimate of frontage and connection fees and they total roughly $3M for the area east of Page 12 The Corporation of the Municipality of Clarington 40 Temperance Street, Bowmanville ON L1C 3A6 1905-623-3379 Attachment 1 to Report ci • EGD-00 -19 ffoon Memo Courtice Road. These are preliminary costs estimates and would be refined through the detailed design and tendering stages. This option gives the owners the most control of the servicing timing as they would be responsible for getting the design completed and could tender the work. This would require the hiring of a consulting engineer to complete the design, assist with the approval process, assist with cost sharing arrangements and construction. Before work could begin the owners would be required to enter into a servicing agreement with the Region of Durham. This is something else that an engineering consultant could assist with. This option would require the owners to pay for the works as well as post securities for the cost of the works which the Region of Durham requires as part of the servicing agreement. There are a couple of other options that are available to undertake the work by those who want to participate at this time and have their prorated costs collected later when those who did not originally participate request a connection. This type of arrangement would have to be facilitated by the Municipality of Clarington and would have a set life span, typically 15 years. This mechanism is called an Endeavor to Collect. This mechanism would be registered with the Municipality and with the assistance of Regional staff, when land owners are requesting water and sewer connections applicants who were not part of the original installation will be required to pay their share of the cost to service the area based on the length of their property frontage. There is a time limit on this option so there is the possibility that if there are connections beyond the 15 years or the time length that is worked out the original investors may not get all of their money back. The last option that the land owners could pursue is to request the servicing be done through a petition process. This essentially requires 2/3 of the landowners representing 50% of assessed land value to agree with the request for servicing and if that happens then 100% of the benefiting owners need to pay their share of the costs (based on frontage) even if they did not support the petition. These costs can be paid over ten years at the interest rate set by the Region of Durham. The benefit of this is that it gets all owners contributing to the cost of the works. The other benefit is that the security requirements that are required as part of a servicing agreement are not required in this process. The one downfall of this process is that the owners lose control over of the VFKHG(W IR WFII G -W Q DQ0IFRIUZ RX(EH:DOaGWAW 5 HJ LN❑ program and would be prioritized based on the needs throughout the Region. Water Servicing In the final design of the feeder watermain system that the Region of Durham is constructing in Phase 2 they have made provisions for water service connections for those properties that are fronting the watermain. So this would apply to the frontages on Progress Drive and Baseline Road from Progress to Courtice Road. A graphic of the lots that this applies to is provided on Figure 2. In this instance the land owners are not Page 13 The Corporation of the Municipality of Clarington 40 Temperance Street, Bowmanville ON L1C 3A6 1905-623-3379 Attachment 1 to Report •C1arfWgMJg EGD -00 -19 Memo required to fund the construction of a local watermain system but they will be required to pay a frontage charge of $381/m of frontage (typically charge on street address frontage but there may be some exceptions to this). In the frontage charge, which covers the RZC,H V /KDLHLR 0MLSLSHLFR\AA1XQM LDF1RA/W+L1RQBJH, the land owner would be required to pay connection fees for bringing the services to their property line. Depending on if just potable water is required or if a fire protection line is also required the connection fees will be the actual costs to install the services. In this type of area these costs are estimated between $10,000 to $15,000 per lot. This money is required at the time of service connection application. The Region does have an option to finance these costs over 10 years at a rate of $51.77/m of frontage per year which represents roughly an interest rate of 6% annually. This payment option would require the land owner to enter into an agreement with the Region. Outside the limits of the feeder watermain frontage localize watermains would be required to service the lands on Courtice Court, McKnight Road, and Baseline Road east of Progress Drive. These would be all of the lots not highlighted in blue on Figure 2. Construction of these services would be undertaken similar to the various options mentioned above for the sanitary sewer where owners could undertake the work as a group with cost sharing arrangements in place, ask the Municipality to agree to an Endeavor to Collect or go through a petition process. All of the same pros and cons noted for the sanitary sewer would apply to the watermain. As noted in the above sanitary section it would be best if a land owner group was organized to hire a consultant to design and assist with administering of completion of the servicing works to ensure a timely delivery of the works. This would be no different if this area was in a greenfield construction area and the industrial parks where developed through a plan of subdivision or site plan with the exception that in the greenfield situation there would be one developer to make the decisions and they would service the lands and recover the cost on the sale of the lots as a result of the increased value that would come with municipal services. Phase 3 Limits Servicing Arrangements Sanitary Sewer and Watermain Similar to Phase 2 although the trunk sewer and feeder watermain are in place they do not provide the function for local servicing with the exception of a portions between Courtice Road and Trulls Road where the trunk is relatively shallow. In the area where a trunk sewer connection can be provided a frontage charge of $421/m of frontage would apply in addition to actual costs for connection works to property line. The watermain connection fees would be $381/m of frontage and additional costs for connections. In this area those properties that do not have any frontage on another road, Cigas Road, will be able to connect to the sanitary trunk and watermain. In order Page 14 The Corporation of the Municipality of Clarington 40 Temperance Street, Bowmanville ON L1 C 3A6 1905-623-3379 Attachment 1 to Report ci • EGD-00 -19 ffngon Memo to service properties on Cigas Road a local sewer and watermain must be provided by the land owners. Trulls Road will also require a local sanitary sewer to service lands not already serviced by the Cigas servicing. These conceptual servicing arrangements are shown on Figure 3 and estimated to be roughly $5.OM for water and sanitary sewer servicing to be paid for by benefitting landowners. As with Phase 2 the various funding arrangements could be made to deliver the servicing. Again it would be best if there was a land owners group formed to help move the local servicing forward who would retain the services of a consulting engineer that could assist with delivery the project. Bowmanville Technology Business Park In the current Region of Durham Budget they have identified the design and construction of this work to occur over the 2020-2022 time period. Considering the time that will be involved to complete the design and procurement of this large infrastructure investment the timelines provided are reasonable. It will be important for Clarington staff and Council to ensure that the Region of Durham keeps this project timeline in order for Clarington to continue to grow this employment area. Without the improvement of and extension of the sanitary servicing in this area no further development can proceed east of Haines Road. Should you have any questions or require any further information, please contact the undersigned. Ron Albright, P. Eng. Assistant Director, Engineering Services Attachments: Figure 1: Courtice Trunk Sanitary Sewer Overall Phasing Plan Figure 2: Trunk and Local Servicing - Phase 2 Figure 3: Trunk and Local Servicing - Phase 3 Cc: Department Heads Page 15 The Corporation of the Municipality of Clarington 40 Temperance Street, Bowmanville ON L1C 3A6 1905-623-3379 Attachment 1 to Report COURTICE TRUNK SANITARY SEWER & FEEDERMAIN REQUIREMENTS FIGURE 2 - Trunk and Local Servicing — Phase 2 Courtice Court and Progress Drive f Baseline Road Local Servicing Costs _ $630,000 Vit_ • _ _ ' - _ BASELINE ROAD OUT. SAN TRUNK SEWER[=01) Attachment 1 to Report EGD -00 -19 FUT. 2001bmO SAN -- -- .. f -• - - - _ _ - - - •.FUT. ZUOmm 5AA1.+_may I 6U Baseline Road Regional Frontage and _ Connection Fees�M Water = $500,000 ' t,;; �►-� ��, ; .gipp FUT.IflUI m 7. 1! SAN FUT. Aurum! WDM l �a llw 1� f H i3z .z HIGHWAY 4a 1 y - ` A I Progress Drive Regional Frontage and Connection Fees Water = $133,000 I , FUT. Zoo m0 SAN T Courtice Court Local Servicing Costs =$1.8M LEGENM COURTfCE COURT EXISTING AND FORECASTED SANITARY/ WATERMAIN SERVICING FIGURE 3 -Trunk and Local Servicing Phase 3 Cigas, Baseline and Trulls Roads Trulls Road Regional Frontage and Connection Fees Water = $200,000 UT. 200mm LU �z r4 D LL. Attachment 1 to Report Frn-nn -1Q MS. t CIGASIROAD --7 L - - - . 1.1 rnmO W1 1 4 �QQmnio W - II Cigas Road LL 04 Local Servicing Costs z Uj cc r 4- ENIkR,.. 1 1 o Trulls Road Baseline Road LEGEND: Local Servicing Costs L Regional Frontage and 2 $685,000 ED -HAND Connection Fees ;;�K Water = $1,000,000 Sanitary = $980,000 CIGAS ROAD EXISTING AND FORECASTED SANITARY! WATERMAIN SERVICING Attachment 4 to Report EGD -009-19 Meeting: GENERAL PURPOSE AND ADMINISTRATION COMMITTEE ®ate: June 25 2012 Resolution .,a By-law#: -, % v -- Report#: FND-018-12 File#: It is respectfully recommended that the General Purpose and Administration Committee recommend to Council the following: THAT Report FND-018-12 be received; 2. THAT Council approve the funding policy as summarized on Attachment "A" for the future use of the Host Community Funds received through the Agreement for the Cleanup and Long -Term Safe Management of the Port Granby Low Level Radioactive Waste Project; 3. THAT Council authorize the establishment of a new Strategic Capital Reserve Fund; 4. THAT the $10 million currently held in Trust be transferred to the Strategic Capital Reserve Fund for future use as approved through the funding policy summarized on Attachment "A"; and 5. THAT the existing Port Granby Reserve Fund be maintained and directed in future to achieve Council objectives pertaining to the End Use Plan and other mitigation measures as deemed necessary. ti Submitted by:' r_ Reviewed by: Nancy Saylor, BBA, CA, Director of Finance/Treasurer NT/hjl , k Franklin Wu, Chief Administrative Officer CORPORATION OF THE MUNICIPALITY OF CLARINGTON 40 TEMPERANCE STREET, BOWMANVILLE, ONTARIO LIC 3A6 T 905-623-3379 Attachment 4 to Report EGD -009-19 PAGE 2 1.0 BACKGROUND 1.1 As Council is aware, Clarington entered into an agreement with the Federal Government entitled "An Agreement for the Cleanup and the Long-term Safe Management of Low -Level Radioactive Waste Situate in the Town of Port Hope, the Township of Hope and the Municipality of Clarington" with a final execution date of March 29, 2001. Article 7 of the Agreement established the Host Community Fee. The article states "Upon the approval of this agreement by the Treasury Board... Canada agrees, in order that the Municipalities will be enabled to address, as they see fit impacts of the presence of long-term waste management facilities within their communities, to make the following payments ...a payment of $10 million to Clarington." The parties also agreed to terms and conditions as set out in Schedule 9 of the Agreement which is entitled "Clarington Fund". 1.2 The terms for the Clarington Fund were essentially that the funds were for the exclusive benefit of the ratepayers of the geographic area of Clarington, the principal had to remain in a trust fund and invested by Clarington, the income earned could be used by Clarington at its discretion, and once the license was approved for the construction of a new waste management facility within Clarington, the $10 million no longer had to remain in trust. If the license was refused or the waste removed from Clarington, the $10 million would have to be repaid to the Government of Canada. 1.3 It was announced on November 30, 2011 by the Canadian Nuclear Safety Commission that they approved the issuance of a Waste Nuclear Substance License for Port Granby valid from the effective date of the land transfer of the Port Granby Waste Management property to the Federal Government. It was announced on March 30, 2012 that the land transfer had taken place. This fulfills the terms of the agreement between the Federal Government and Clarington pertaining to the $10 million host community fee. The funds can now be released from the trust fund and used at Clarington's discretion for the benefit of the ratepayers of Clarington. 1.4 At a meeting held on March 1, 2010, the Council of the Municipality of Clarington approved the following resolution #GPA -138-10: "That the Finance Department be directed to prepare a report with recommendations as to the disposition of the $10 million Port Granby Funds." Now that the conditions of the agreement have been satisfied, this report fulfills the direction of Council. Attachment 4 to Report EGD -009-19 REPORT NO.: FND-018-12 PAGE 3 2.0 HOST COMMUNITY TRUST AND PORT GRANBY LLRW AGREEMENT RESERVE FUND 2.1 In accordance with the Federal Agreement, the principal amount of $10 million was set aside in the Host Community Trust Fund in 2001 and has been maintained at the $10 million balance as reflected annually in the Municipality's Trust Fund financial statements. The funds have been invested in Guaranteed Investment Certificates of various Schedule 1 banks. Currently there is a spread of maturities ranging from May 2013 to December 2015. 2.2 All interest earned on the $10 million principal has been deposited into the Port Granby LLRW Reserve Fund. Commencing in 2002 to date through the budget process, interest in the Port Granby Reserve Fund has been transferred, in varying approved budget amounts, to the operating budget to assist in offsetting tax levy increases throughout the 2002 to current time frame. 2.3 For the 2001 year, when the trust was created after the budget process that year, the funds earned and continued to earn interest in the reserve fund as there was no approved budget transfer to offset the levy due to the timing of receipt of the principal funds. Some of these funds were used through the 2004 budget process to top up the then public works, fire, and community services reserve funds. As a result, there remains a balance in the Port Granby LLRW Reserve Fund of approximately $150,000. 3.0 PORT GRANBY END USE AND OTHER MITIGATION MEASURES 3.1 There is currently a balance in the Port Granby LLRW Agreement Reserve Fund of approximately $150,000. It is recommended that the Reserve Fund be retitled the Port Granby Reserve Fund. While the Federal Government, through the Port Hope Area Initiative Management Office, is responsible for the construction and operation of the new waste management facility and mitigating impacts thereof, there may be some measures that Council would like to undertake in future years pertaining to the existing residents in the Port Granby area and/or the Port Granby Project End -Use concept as endorsed by Council through report PSD -051-10. 3.2 It is therefore recommended that the existing balance in the Port Granby Reserve Fund of approximately $150,000 be dedicated to future Port Granby initiatives, such as enhancements to the End Use Plan as approved by Council. REPORT NO.: FND-018-12 Attachment 4 to Report EGD -009-19 PAGE 4 4.0 INTEREST EARNED• •COMMUNITY FUNDSISTRATEGIC CAPITAL RESERVE • 4.1 As referenced above, since 2002 interest from the Host Community Trust has been used to offset tax levy increases. Due to the decline in interest rates in the last couple of years, this value in the 2012 budget is now set at $250,000. Any reduction in this budget value in future years would therefore represent a tax levy increase as the offset would be lost. Essentially, if Council opts to redirect the interest income of $250,000 to another purpose, or uses some or the entire principal, for 2013, this would have an approximate effect of a 0.625% tax levy increase. 4.2 Since interest rates are at historical lows, it is anticipated that over the long run, interest rates will once again increase to a more favourable value. There is an opportunity to maintain the operating budget contribution at the $250,000 level but direct any increase in interest income above that to other priorities. It is recommended that any interest earned above the $250,000 be used to fund road reconstruction or rehabilitation works in order to maximize the life of our roads infrastructure. It is recommended that the $250,000 continue to be transferred annually to the operating budget to offset tax levy impacts. 5.0 STRATEGIC CAPITAL RESERVE FUND 5.1 As the conditions of the Host Community Agreement have now been satisfied, it is recommended that a new reserve fund entitled "Strategic Capital Reserve Fund" be established and that the principal amount of $10 million currently in the Host Community Trust be transferred to the Strategic Capital Reserve Fund. 5.2 The satisfaction of the terms of the trust provides a unique and positive opportunity for the Municipality to make significant long term strategic decisions to benefit Clarington taxpayers over the long term. There has been significant discussion and focus over the past several years in three areas, deteriorating condition of roads and other municipal assets, debt levels and financing opportunities, and lack of servicing hindering non-residential development opportunities. As the principal funds are non -replenishing, using the principal funds to offset operating expenditures does not sustain those services in subsequent years, while interest earned on the funds would slowly deplete as the funds were depleted. The funds should be considered from a long term sustainable perspective. Attachment 4 to Report EGD -009-19 PAGE 5 5.3 This philosophy provides the basis for the recommendations that the Strategic Capital Reserve Fund be structured to address these three priorities as explained below and summarized in the Funding Policy on Attachment "A". F_Tr7l►��l�►�� 6.1 Council has had dialogue over the past several budget years over the state of Municipal Assets, especially pertaining to road infrastructure, but also other municipal infrastructure to a lesser degree. The Municipality currently owns assets of approximately $596 million (valued at historical cost), with a net book value or depreciated value of $391 million. Approximately 65% are roads or assets needed to maintain roads. While we are in the very preliminary stages of addressing a long-term asset management strategy, the percentage of paved lane kilometers where the condition is rated as good to very good has been hovering around 58% for the last three years. 6.2 This clearly indicates that the need for roads and related infrastructure financing will be a priority for a long term and sustainable asset management strategy. It is therefore recommended that the Strategic Capital Reserve Fund interest earned beyond the $250,000 be transferred for road construction and rehabilitation works from 2016 onward. It is also recommended that the Strategic Capital Reserve Fund be incorporated as a key financing tool in the development of the Municipality's long term asset management strategy. This would be incorporated as part of the funding policy for the Strategic Capital Reserve Fund. 7.0 DEBT LEVELS AND FINANCING OPPORTUNITIES 7.1 Currently, the total net long-term liabilities are $24.2 million. This is represented by Indoor Recreation and Library facilities. As Council is aware, there have been opportunities to make balloon payments on municipal debt or to renew for the final five years. Another such opportunity exists in 2014 relating to the indoor soccer/lacrosse facility. 7.2 While it is not anticipated that there will be sufficient funds in the Indoor Recreation Development Charges Reserve Fund, another opportunity does exist. The Municipality may opt to issue internal debentures. These still have to be processed through proper notifications to the upper tier in compliance with the Municipal Act and with official structured loan documentation. However, the Municipality could essentially "purchase" its own debentures. The result is that REPORT NO.: FND-018-12 Attachment 4 to Report EGD -009-19 PAGE 6 the Strategic Capital Reserve Fund could invest in Municipality of Clarington debentures at the market rate of return. This generally results in a higher rate of return to the Reserve Fund than is earned through direct investments in banking instruments. The funds would be repaid over the five years by the development charges collections, as appropriate, exactly the same as if the debenture was floated in the marketplace. 7.3 While a specific recommendation on the Indoor Soccer/Lacrosse facility is not requested at this time, it is recommended that a funding policy for the Strategic Capital Reserve Fund be approved whereby whenever Municipal debentures are being considered as a financing tool for municipal infrastructure, the Strategic Capital Reserve Fund be considered as a source of internal debenture issuance, thereby increasing the return on investment in the Strategic Capital Reserve Fund and allowing some flexibility for the Municipality in repayment options for its future debt needs. One item of future debt consideration will be the Green Road Grade Separation. Each future project would be addressed though the annual budget process. 8.0 SERVICING OF NON-RESIDENTIAL DEVELOPMENT OPPORTUNITIES 8.1 This represents the third funding policy being recommended for the Strategic Capital Reserve Fund. As Council has seen through many planning documents as well as observed through presentations from the Clarington Board of Trade, servicing of non-residential lands remains a critical barrier to the development of non-residential areas within Clarington and as a result limiting the opportunities for new job creation in Clarington. This is particularly the case for industrial development. 8.2 There are some circumstances in Clarington where the lack of servicing, whether it be roads, sanitary sewers, water, or storm sewers is an impediment to development, but there are barriers for the private developers to provide the upfront costs that are required. There are some opportunities that may exist in the near future whereby a capital investment on behalf of the Municipality may provide for a sufficient level of service to "open up" those areas for development. This would create both jobs and investment in Clarington as well as converting vacant lands to lands and structures in the industrial tax class. 8.3 Should the Municipality consider up fronting the costs of the basic required servicing, the cost could be structured through a cost sharing agreement on title whereby the benefitting property owners would repay the costs incurred plus an indexing factor. In this way the principal amount of the investment would be returned to the Strategic Capital Reserve Fund over time indexed and with the potential of interest also. This would ultimately result in economic development REPORT NO.: FND-018-12 Attachment 4 to Report EGD -009-19 PAGE 7 and job creation, as well as increased tax revenue to the Municipality. This funding policy would only be considered in circumstances whereby the principal would be returned to the Strategic Capital Reserve Fund once the development proceeds through an appropriate cost sharing agreement. 9.0 CONCURRENCE - Not applicable 10.0 CONCLUSION 10.1 This issue has been extensively reviewed with the Chief Administrative Officer and we have provided these recommendations based on long-term sustainable financial principles. As referenced above, the release of the Host Community Funds from the trust provisions provides a unique opportunity to establish and generate some significant long term benefits to Clarington residents. 10.2 It is therefore recommended that a Strategic Capital Reserve Fund be established and a Funding Policy be endorsed outlining the future uses of the funds as described in the attached Appendix "A". CONFORMITY WITH STRATEGIC PLAN — The recommendations contained in this report conform to the general intent of the following priorities of the Strategic Plan: (Place an "X" in the box for all that apply) X Promoting economic development X Maintaining financial stability Connecting Clarington Promoting green initiatives X Investing in infrastructure Showcasing our community Not in conformity with Strategic Plan Staff Contact: Nancy Taylor, Director of Finance/Treasurer Attachments: Attachment A - Funding Policy for Strategic Capital Reserve Fund List of Interested Parties to be advised of Council's decision: None Attachment 4 to Report EGD -009-19 ATTACHMENT "A" TO FND-018-12 STRATEGIC CAPITAL RESERVE FUND FUNDING POLICY INTRODUCTION: Pursuant to Report FND-018-12, the Strategic Capital Reserve Fund has been established by By -Law # 2012 -XXX. The Host Community Fee received through the Agreement for the Clean-up and the Long-term Safe Management of Low -Level Radioactive Waste Situate in the Town of Port Hope, the Township of Hope and the Municipality of Clarington has been transferred to the Strategic Capital Reserve Fund. PURPOSE: The receipt of the Host Community Fee provides a unique and positive opportunity for the Municipality to make significant long term strategic decisions to benefit Clarington taxpayers over the long term. The purpose of this funding policy is to set out the authorized uses of the funds, along with interest earned to maximize the positive benefits of this funding for many years to come. FUNDING POLICY: It is approved by Committee at its meeting of June 25, 2012, and ratified by Council on July 3rd, 2012, the following policies pertaining to the newly created Strategic Capital Reserve Fund: a) The current $250,000 contribution from interest earned on the principal funds continue to be used to offset the tax levy through the current budget for future budget years; b) Interest earnings in excess of $250,000 be used for road construction and rehabilitation; and c) The principal amount of the Strategic Capital Reserve Fund be invested for three priorities: 1) Long-term asset management strategic financing tool, particularly for Roads, 2) Investment in Debt financing opportunities through internal debenture issuance, or 3) Investment in Servicing of Non -Residential areas as a front -ending tool.