TAMRMS#: B06
8.1
Information Item Only
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Northeast Servicing Project Update
Presented by: Dawny George, Director, Engineering Services, Engineering Services
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SUMMARY
This report provides an update on the Northeast Servicing Project and outlines upcoming decision gates for Council’s consideration.
ALIGNMENT TO COUNCIL DIRECTION OR MANDATORY STATUTORY PROVISION
On June 6, 2023, Council passed the following motion:
CM-23-26
That the Old Bellerose Trail Project is revisited and if there is a more affordable option than restoring to previous standard while still providing a trail space, that it is brought forward for council's consideration.
On May 16, 2022, Council passed the following motion:
CB-22-047
That Capital Project Charter WASWT-021-Northeast Servicing Projects be added to the 10 year municipal growth plan in 2023 for future funding consideration.
That funding in the amount of $2,000,000 be approved from the Off-Site Levy Recovery Funds in 2022 to advance the design component of the project described as phase 1 in the attached project charter.
BACKGROUND AND DISCUSSION
Issue:
Development within the northern part of the City (e.g. Jensen Lakes, Erin Ridge North) has utilized all of the existing sanitary capacity for the area. It is anticipated that the stormwater capacity will be utilized fully within the next 3 to 5 years. To allow additional development to continue and be serviced sufficiently with water, sanitary, and storm services, there is a need to extend new servicing to the north area of the City.
History:
In Q3 2020, a non-binding tri-party memorandum of understanding (MOU) between the City and two significant developers was entered into as a result of the parties wishing to find solutions to the nearing sanitary servicing capacity issues. Accordingly, developers front-ended the initial concept design with the City as a stakeholder who identified potential syphon option for sanitary servicing. To manage various risks identified through the initial phase of advancing this project under developers, a decision was made for the design component to be front ended by the City in 2022. In this way, mandated public procurement requirements could be met by the City if a decision is made in the future that the City front ends the construction phase of this project due to its large expense, as one single developer may not be able to solely afford it. One of the key understandings under the MOU was to have a mutually agreeable funding model negotiated in good faith where all parties would contribute for construction of the infrastructure upon completion of the design with a supplemental substantive agreement in place.
The capital project charter WASWT-021 Northeast Servicing (NES) Project was approved in 2022 with a budget of $2,000,000 to advance Phase 1 of the project, which included the design and right of way acquisition.
On October 8, 2024, the Standing Committee of the Whole (SCOW) was informed of the implications of financing and proceeding with the servicing to the Northeast area in the agenda report AR-24-439. The summary of the report’s main points is stated below:
• The majority of the Northeast area does not align with the priority growth areas identified in the Municipal Development Plan (MDP). Investing in a new growth area concurrently with other priority development areas would stretch internal resourcing and may trigger additional capital projects prematurely as development adds demands on other infrastructure and services.
• The Northeast area servicing has debt implications for the initial servicing that will impact the ability to advance the highly prioritized future Community Amenities or a new Police Building for many years. This is only the initial servicing, so as development progresses it may spur other projects that could continue the debt burden.
• There is a risk of investing in two outward growth areas (St. Albert West and Northeast) at the same time which could negatively impact the pace of development and thus the rate of return.
• No specific grant opportunities had been identified to offset the project costs. Significant developers had also not committed additional funds to assist with front-ending this project.
• A hold on development could be considered until servicing is determined. Developers have an opportunity to construct their permanent lift stations (combined sanitary and storm), with enhanced storage features, to provide additional interim capacity to allow some developable lands in the Northeast to continue building out. If the NES project is approved and funded, the permanent lift stations (without additional storage) are a requirement of the ultimate plan.
Current Status:
Since the presentation to SCOW on October 8th, the project design has advanced to 90% completion and the revised project cost estimate for phase 2 is ~$74.1M including a 15% contingency. A breakdown of OSL and non-OSL cost, and scope are outlined below:
a) Offsite Levy (OSL) portion of ~$71.1M equates to 96%
b) Non-OSL portion of ~$3.0M equates to 4%.
The offsite leviable portion now includes the installation of a trail/maintenance path (<1% of the estimated total cost) along Old Bellerose Drive along with the utility lines and sanitary lift station scope. Access along Old Bellerose Drive is needed by the City’s Utilities Branch for maintenance of the infrastructure that will be built, such as storm manholes and outfall towards the river. Therefore, the trail scope is now included as part of the OSL scope within the Utility package and addresses the intent of the 2023 Council motion CM-23-26 noted above. This trail scope does not include any additional amenities such as benches, garbage bins, or additional landscaping. As detailed design has progressed, the use of trenchless methods (micro tunneling and directional drilling) is recommended along Old Bellerose Drive due to soil stability issues. This results in a reduced impact to the existing gravel walkway than originally thought while providing cost savings and meeting access needs for Utilities.
The non-offsite leviable portion includes two scopes:
1) the installation of a fiber optic conduit only, along the same alignment as the utility storm line for a future installation of a fiber line pull through a separate project charter yet to be approved and is expected to be a municipal cost and,
2) the installation of a water service line along Bellerose Drive and a sanitary service stub for future developable land that will benefit from economies of scale cost savings and cost avoidance from unnecessary future disruption of City’s already installed infrastructure by having these constructed as part of the NES project. The part two scope cost is expected to be recovered from the benefitting developer through a separate cost recovery agreement yet to be finalized.
Pending design phase tasks include:
a) Completion of the utility right of way for utility lines - expected in Q4 2024.
b) Stakeholders review of the 90% design and any required amendment to the final design and corresponding cost estimate - expected in Q4 2024.
c) Finalization of the 100% design, which is the tender package- expected in Q4 2024/early Q1 2025.
d) Completion of the cost recovery agreement for part two non-OSL scope- expected in Q1 2025.
Next Steps:
Prior to bringing forward a capital budget amendment for the construction phase and to allow administration to provide a confident recommendation, further analysis needs to be conducted for this project.
The analysis will review a number of key issues and explore available risk mitigation options:
1. Assess the overall value of the investment to the City through a fiscal impact analysis. This will include initial investment, assessment revenue, debt servicing, offsite levies recoverable, development and operating costs. This analysis will also review potential funding sources other than debt funding, such as developer contributions or grants, and what steps would be required to secure those funds.
2. Review the City’s ability to pay the debt servicing costs without risk of the servicing costs being borne by the taxpayers if development does not progress as planned. The City would be reliant on development levies to pay the debt servicing costs, but the risk is that development may not proceed as quickly as anticipated, which could be a result of market demand, economic downturns, or developer delays. This is exasperated by growing outward in both the west and northeast where competing growth nodes may impact each other’s development pace, and thus delaying return-on-investment timelines.
3. Review the long term impacts with the northeast servicing project moving forward, including:
a. Impact of the additional infrastructure and development on operations and maintenance.
b. Impact that additional growth may have on existing service levels (i.e. recreation, emergency services) and potential need to bring projects forward to maintain services. i.e. moving forward with NES but deferring the Police building to accommodate growth may create a service gap.
c. The domino effect where additional levy/tax funded projects will be required as development in the Northeast occurs.
The analysis will also weigh the benefits that this project would bring forward including:
1. Supporting housing growth.
2. Regaining capacity in existing utility infrastructure.
3. Easing demands on City services for ad-hoc utility capacity reviews.
While analyzing what the City can afford to support this project, administration will continue to explore what third party funding is available, including developer front-ending and grants. Additionally, regardless of the project approval to construction phase, administration will explore if a hold on development through a time-limited Land Use Bylaw amendment can be introduced in the northeast part of the City.
It is anticipated that Administration will return to Council with a recommendation and revised project charter for a decision in Q1 2025.
STAKEHOLDER COMMUNICATIONS OR ENGAGEMENT
Stakeholder Design Collaboration:
Administration worked collaboratively with active developers and their consultants during the project design process, going as far back as the 2020 signing of the MOU. They were asked to review designs and provide comments during key milestones. The design team worked with the developer who provided the site for the sanitary lift station to find a location that was integrated into their proposed development. In October 2024, the developer provided the City with the location for the lift station through the dedication of a utility right of way, which will be transferred to the City as a public utility lot (PUL) at no cost during a future subdivision application. Other developers have expressed interest in working with the City in providing interim measures to help progress development while the servicing design is in progress and until the ultimate servicing is built.
Cost Sharing Requests:
One of the key elements of the tri-party MOU signed in 2020 was to have a negotiated mutually agreeable funding model where all parties would contribute with a substantive agreement for cost sharing in the construction cost upon completion of the design.
Administration reached out to three developers in September 2023 requesting they provide significant front-ending dollars as a contribution towards financing the servicing project costs. None of the developers were willing to commit to providing a financial contribution at that time. As the project design had reached 90% completion, administration reached out to these developers again in October 2024 reiterating the request for significant front-ending dollars. The developer who provided the sanitary lift station location is not within an area with an approved Area Structure Plan, and with no active development is not in a position to make any financial contributions to the project. One developer verbally (declined to put the offer in writing) offered to provide $500,000 in upfront financial contributions, which represents less than 1% of the project costs. The final developer did not respond to the City by the requested date. To continue negotiating with developers for front-ending contributions in good faith, administration will need direction from Council as to the acceptable risk tolerance and willingness for using the City’s debt funding capacity towards the overall project costs.
Indigenous Stakeholder Discussions:
Discussions have occurred with the City’s Indigenous Relations Coordinator and the lead for the Metis local engagement subcommittee. It is understood that monitoring during construction activities and a ground blessing prior to commencement of the project are to be expected.
ALIGNMENT TO PRIORITIES IN COUNCIL’S STRATEGIC PLAN
Initiative aligned with Strategic Plan:
None at this time
ALIGNMENT TO LEVELS OF SERVICE DELIVERY
D. Land Use and Development
D.2 Infrastructure Planning
D.2.1 Off-Site Levy Program
Support growth and development by administering City's off-site levy program for essential infrastructure needed.
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Report Date: November 5, 2024
Author(s): Tanya Hynes, Jordan Betteridge, Regan Lefebvre
Department: Engineering Services
Department Director: Dawny George, Tim Saunders
Managing Director: Diane Enger and Adryan Slaght
Chief Administrative Officer: Bill Fletcher