City of Kimberley votes to delay phase 2 of flume project

Just too many red flags indicate cost overruns, Council says in six to one vote

Kimberley City Council has decided to defer Phase II of the Mark Creek Rehab (flume) project.

The matter was the subject of a special Council meeting on Tuesday evening. Council heard from staff, then, after intense discussion, decided they could not proceed this construction season. There were too many red flags, it was decided, and after making many statements that the project would not proceed over-budget, Council voted six to one (Bev Middlebrook against) to defer.

The motion on the floor was:

“That Council opt to cancel some of the planned capital projects to make up the shortfall in the flume budget.”

Don Schacher from the Operations Department prepared a report for Council and the ultimate conclusion was that the project was facing a budget shortfall of $364,038.68. This was after working with the contractor with the lowest bid to squeeze everything they could out of the tender. Operations staff and Chief Financial Officer Holly Ronnquist then looked in the City financial plan to find those funds plus a contingency, which would bring the overrun to $640,819. Ronnquist found those funds, but it would mean the cancellation of some planned capital projects such as water main replacements and paving.

But, to make the situation more difficult, if Council voted to defeat the motion and defer the projects, there are costs as well. Ronnquist estimated the cost of not proceeding with the project at $386,033. This includes non-eligible costs to date, the pay out of the contract to the Aqua-Tex, debenture costs and paying out grant monies already used to the Flood Protection program. Another cost will be an estimated $75,000 to $100,000 to repair the joint between phase 1 and phase 2 of the project (the joint was only designed to last one year) and to remediate the construction site.

With those facts in hand, discussion ensued.

Coun. Albert Hoglund said he was against going ahead, saying he had a real problem with cancelling capital projects.

“Staff gives us their priority projects every year. There are millions of dollars of projects and we pick what staff feels is a real priority. If we can’t afford the flume project, we told people we weren’t going to do it. I am not in favour of cancelling capital projects. I will vote against it.

“There are red flags all over the place,” said Coun. Darryl Oakley. “I think we should re-tender in the fall. We have to stay true to taxpayers. We’ve got to stay in budget.”

“But the more you delay it, the more it will cost,” said Middlebrook. “We would be giving back $2 million in grants. The staff wages alone in the time it takes to write grants. The $386,000 we would lose is huge. How do we tell taxpayers that we are throwing it away? Paving is important, but this is a safety issue as well.”

“There is nothing to say you can’t go back to government and say, ‘it’s not a $3.15 million project, it’s a $4 million project,” said Hoglund.

Council had questions about the route forward if the project was delayed.

“We have to proceed at some point,” said Coun. Kent Goodwin.

Ronnquist said that funding intakes were unpredictable as to when they occur and that construction costs were increasing at a rate of 3 to 4 per cent a year. She also said that the community approval for borrowing on the flume project had a time limit of five years and there were two years left.

“If it takes a couple of years for a grant opportunity to come around, we will have to go back to the community for approval,” she said.

“We made a bunch of mistakes in the first phase and learned from them,” said Mayor Don McCormick. “I’m hearing all kinds of things after the tender process that makes me believe this is a $4 or $5 million project. How can we under-estimate after we under-estimated in the first phase? How can we do that again?

“We’re jumping all over the place. $600,000 is not a modest contingency. I’m just uncomfortable with this.”

Hoglund pointed out that there were still large question marks about what needed to be done around BJ’s Restaurant, where there was a plan, but some uncertainty as to whether it would work.

“We don’t know if it’s going to be a problem,” he said.

“There hasn’t been a good understanding of the whole project,” said Coun. Nigel Kitto. “Now looking at costs of going ahead or not, we’re between a rock and a hard place. But we need to get it done for the safety issue and the look of the town.”

“I have issues with us putting a tender out, then making changes after,” McCormick said. “If we have city staff do some of the work it’s like letting the contractor off the hook. It almost becomes cost plus. That’s not viable. Making design changes on the fly happened it phase 1 and it ran out of control.

“This feels like a minimum $4 million project. If we go back and get new grants, that’s one thing. I don’t think we should proceed right now.”

McCormick said he also had concerns that only two companies bid on the contract. He believes it’s because the tenders went out so late and companies already have their construction season planned. He would like to see tender documents for the next phase go out in December, he said.

“We could take that time to get a second opinion on engineering. We can go to government and say, ‘we are being fiscally responsible, we need an extension on the grant. That’s why we have MLAs and MPs. I can’t imagine being  penalized for being fiscally responsible.”

In the end, McCormick said, the City made a mistake on the grant amount.

“I don’t like the situation,” said Goodwin. “People want to see this done. I just don’t like stepping back, it’s opening a number of cans and I don’t know if it will make it any better than it is now.”

“We all want to see this project done,” McCormick said. “The question is have we mitigated the major risks associated with phase 2. The answer is no we haven’t. We can’t repeat those mistakes again, we just can’t.”

“The definition of insanity is doing the same thing and expecting different results,” said City CAO Scott Sommerville after being asked for his thoughts. “I feel we are setting up for cost overruns.”

At that point the motion was defeated and the flume project deferred.