Grand Bend Trunk Sanitary Sewer Phase One Update and Amendment to the Budget

Staff Report

Report To: Dan Best, Chief Administrative Officer From: Don Giberson, Director of Infrastructure & Development Date: June 22 2020 Report: ESD.20.25 Subject: Grand Bend Trunk Sanitary Sewer Phase One Update and Amendment to the Budget.

Recommendations: That South Huron Council receives the report from D. Giberson, Director of Infrastructure and Development Re: Grand Bend Trunk Sanitary Sewer Phase One Update; and

That South Huron Council authorize the Mayor and Clerk to enter into the Memorandum of Understanding with the Municipality of Lambton Shores for the Grand Bend Trunk Sanitary Sewer Phase One; and

That South Huron Council approves an “Amendment to the Budget” to increase the capital budget for the Grand Bend Trunk Sanitary Sewer Phase One from $1,494,753 to $1,641,379.84; and

That South Huron Council authorize borrowing from the Water Reserves to fund the Grand Bend Trunk Sanitary Sewer Phase One project; and

That South Huron Council authorize the Development Charges By-law to be amended to include the change in the growth component of the Grand Bend Trunk Sewer Phase One.

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Purpose: The purpose of this report is to provide Council with an update regarding phase one of the Grand Bend Trunk Sanitary Sewer and to obtain authorization to enter into an Agreement with the Municipality of Lambton Shores. Staff are also seeking approval for a budget amendment, authorization to borrow from the water reserves and to update the DC Charges By-law.

Background and Analysis: Further to the Grand Bend Trunk Sanitary Sewer Update Report to Council on August 12, 2019, Staff have concluded discussions with the Municipality of Bluewater regarding their potential interest in future access to phase one of the trunk sewer. Municipality of Bluewater declined to participate in phase one of the trunk sewer and provided a confirming Council Resolution. If Bluewater wishes to access the Grand Bend Sewage Treatment Facility in the future, they will be required to establish an alternative route for their own separate infrastructure.

Discussions have continued with Lambton Shores Staff regarding construction, cost sharing, capacity allocations, ownership and future maintenance/operation of the Grand Bend Trunk Sanitary Sewer. These discussions resulted in agreement, at the Staff level, on all issues regarding the trunk sewer. A Memorandum of Understanding has been prepared that includes all matters related to the Grand Bend Trunk Sewer.

The ownership of the section of trunk sewer within the Lambton Shores boundaries is proposed to be joint, as the capacity/flows are joint. The section of trunk sewer north of the Lambton Shores municipal boundary is proposed to be entirely a South Huron asset, as the capacity/flows are 100% South Huron. Upon completion the joint section of trunk sewer is proposed to be added to the existing agreement for the Grand Bend Sewage Treatment Facility, as this agreement already includes all governance matters related to operation, maintenance, repairs and future replacement of joint assets.

Based on Bluewater’s decision to not participate in the trunk sewer, their original proposed capacity has been reallocated to South Huron and Lambton Shores based on potential future development in the Grand Bend area. The capacity allocations have also been updated to include potential development lands east of the village of Grand Bend in both South Huron and Lambton Shores. The updated capacity allocations are shown on the map attached to the draft Memorandum of Understanding. P a g e | 3

The proposed cost sharing calculations have been updated to reflect the updated capacity allocations. Cost sharing continues to be based on a flow proportional basis with an allowance/credit for the remaining useful life of Lambton Shores’ existing sanitary sewer. Lambton Shores’ staff have agreed that all road related costs on the connecting link portion of the project (Ontario Street) will be 100% Lambton Shores. It was agreed that Lambton Shores would be the project lead, initially pay all costs and re-invoice South Huron for our share of the costs.

Due to scheduling issues associated with the tourist season in Grand Bend and Ontario Street being a connecting link project, the trunk sewer project was split into two sections. The first section is on Municipal Drive (PS-2 to Ontario Street) and the second is on Ontario Street (Municipal Drive to Indian Road). The first section (Municipal Drive) was tendered and closed on February 27, 2020. Two tenders were received and both tenders were significantly over the engineers’ estimate. Tenders were checked and found to be in compliance. The additional costs were attributed to the degree of difficulty of this section of the project and the availability of contractors who do this type of deep sewer work. The validity period for this tender has been extended to June 27, 2020 at which point it will expire and become invalid.

The design of the connecting link portion of the project has been completed and the engineer has prepared an updated/detailed construction estimate based on the final design. Accordingly, the cost sharing calculations have been updated to reflect the actual tendered costs for the Municipal Drive section and the engineers estimate for the Ontario Street section of the project. The updated cost sharing calculations are included in the draft Memorandum of Understanding.

Lambton Shores is holding the award of the tender for the Municipal Drive section of the project until South Huron confirms that they wish to proceed with the trunk sewer project and enter into the Memorandum of Understanding with Lambton Shores. The tender for the Municipal Drive section is due to expire on June 27, 2020.

The COVID19 pandemic has also delayed the project. However, this may benefit the project with less tourist traffic in the Grand Bend area.

Operational Considerations: Several alternatives were considered, but a joint project with Lambton Shores was confirmed as the most cost effective solution. It should be noted that Lambton Shores has no obligation to partner with South Huron. If we proceeded separately with our own trunk sewer, the cost would be considerably higher. A separate sewer installation adjacent to and deeper P a g e | 4 than the existing Lambton Shores trunk sanitary sewer would be much more difficult/expensive to construct. South Huron would also pay 100% of the costs, including all road restoration costs on Ontario Street.

South Huron’s Strategic Plan: The recommendations and actions outlined in this report are reflective of the following strategic objectives:

 Administrative Efficiency and Fiscal Responsibility

 Increased Communications and Municipal Leadership

 Transparent, Accountable and Collaborative Governance

 Dedicated Economic Development Effort

Financial Impact: The approved 2020 capital budget for the Grand Bend Trunk Sanitary Sewer project is $1,494,753 (South Huron share is $1,280,243 and Lambton Shores share is $214,612).

The approved budget for this project is summarized as follows:

Construction = $1,311,500 Engineering = $ 157,400 Non-recoverable HST = $ 25,853 Total Capital Cost $1,494,753

Based on the actual tendered price for the Municipal Drive section (PS-2 to Ontario Street) and the updated engineers estimate for the connection link section (Ontario Street), including all connecting link road works, engineering costs and non-recoverable HST, the total estimated project cost is $4,500,178.84

South Huron share of the trunk sewer costs is estimated at $1,641,379.84 this is an increase of $361,136.84 over the approved budget cost for South Huron’s share of the trunk sewer. (ie. $1,280,243 - $1,641,379.84 = $361,136.84).

Where expenditure estimates approved in the budget have been subject to quotations or tenders quoting an amount greater than the estimated expenditure for that item, notice of such amendment is required to be included in the Report to Council and the printing of this item on the Council P a g e | 5

Agenda, with the notation “Amendment to Budget”, shall constitute sufficient notice.

The proposed increase in the capital budget for the Grand Bend Trunk Sewer Phase One, requires an “Amendment to Budget” and this report to Council constitutes sufficient notice.

The following is a summary of the total project costs including the connecting link road works funded entirely by Lambton Shores and the flow proportional cost sharing for the trunk sewer:

GRAND BEND AREA TRUNK SANITARY SEWER COST-SHARING BREAKDOWN - ONTARIO STREET AND MUNICIPAL DRIVE GMBP File No. 519025 PROPOSED COST-SHARING TOTAL MUNICIPALITY OF MUNICIPALITY OF ESTIMATE SOUTH HURON LAMBTON SHORES $3,311,275.00 $821,058.01 $2,490,216.99 SUBTOTAL ONTARIO STREET

SUBTOTAL MUNICIPAL DRIVE $1,015,260.56 $723,643.08 $291,617.48

SUBTOTAL $4,326,535.56 $1,544,701.09 $2,781,834.47

ENGINEERING DESIGN (2020) $31,700.00 $22,594.68 $9,105.32

ENGINEERING CONTRACT ADMINISTRATION $64,110.00 $45,695.42 $18,414.58

SUBTOTAL INCLUDING ENGINEERING $4,422,345.56 $1,612,991.19 $2,809,354.37

NON-RECOVERABLE HST $77,833.28 $28,388.64 $49,444.64 $4,500,178.84 $1,641,379.84 $2,858,799.00 SUBTOTAL INCLUDING ENGINEERING

This project was not included as a proposed capital project in the current Water and Wastewater Rate Study. It is proposed to borrow from the Water Reserves and repay, with interest, over the next couple of years. The long term Sewer Capital Budget forecast has been adjusted to accommodate this funding model.

The original growth related costs of the trunk sewer are included in the recent Development Charges Study and Development Charges By-law. Since the completion of the DC Charges Study, Bluewater has withdrawn from the project and their capacity has been reallocated for future growth in South Huron and Lambton Shores. This will necessitate an amendment to the DC Charges By-law for the increased growth component and associated costs. P a g e | 6

This will result in an approximate 8% increase in the DC charge. The revenue from these Development Charges will be collected over time as the Grand Bend area grows and develops.

Legal Impact: If Council agrees to enter into the Memorandum of Understanding, there is a legal obligation to amend the GBSTF Tri-party Agreement with the Municipality of Lambton Shores and Municipality of Bluewater.

If an agreement cannot be reached to amend the Tri-party Agreement, a separate agreement will be required between Lambton Shores and South Huron regarding the governance of the joint trunk sewer.

Staffing Impact: There are no staffing implications for the Corporation resulting from the proposed recommendation.

Communication Actions: None

Policies/Legislation: 1. Ontario Water Resources Act, R.S.O. 1990, c. O.40 2. South Huron 2020 Capital Budget

Consultation: Andrew Grunda, Watson & Associates; Dan Best, CAO; Sandy Becker, Director of Financial Services; and Shawn Young, Manager of Enviromental Services