Where did the money go? The amazing tale of the Snug Cove Sewer Treatment Plant Expansion

On November 4, 2011 on my election website I posted an article outlining reasons why Richard Underhill and I decided to file a petition to the Court asking for a “judicial review” about how the Municipality handled the process which led to the new Official Community Plan.

The major reason for us to take such a drastic action was a growing concern about how Bowen Island Municipality, in our opinion, was repeatedly violating proper process, its own policies and bylaws, and particular sections and provisions of the law. We had reached a point where we had to say “Enough is enough,” and the Municipality’s actions regarding the Official Community Plan were just the proverbial “last straw that broke the camel’s back.”

Today I want to address one of the most alarming “straws” – the sewage treatment plant expansion in Snug Cove.  

April 2007

The Municipality, by way of a “Request for Proposal,” obtained a quote for an expansion of its sewer treatment plant in Snug Cove to double the capacity of the plant:

The proposal came from the same manufacturer/installer who constructed the original sewage treatment plant in 1999.

For reference, see Exhibit STP-1.

May 2007

The Municipality submitted the 2007 Proposed Five Year Plan – Snug Cove Sewer Local Service Area.

Sewer Treatment Plant Expansion cost:   $740,000

No explanation for the increase of $180,000 (i.e. 32.42%).

For reference, see Exhibit STP-2 (pages 5 and 7).

February-March 2008

On February 1, 2008 the Municipality, still in compliance with the Municipality’s own Purchasing Policy (Requests for Proposals are required for any design or consulting services in excess of $10,000), posted a Request for Proposal for “Engineering Services for Snug Cove Sewage System Upgrades” (see Exhibit STP-3).

In response to the Request for Proposal, the Director of Engineering submitted a report dated March 6, 2008 to the Chief Administrative Officer (see Exhibit STP-4).

The report suggested that a total of $63,895 be awarded as fees for a preliminary engineering report, survey, and submission of final design report including construction costs.

A Purchase Order for $30,190.00 was issued on March 26, 2008 (see Exhibit STP-5). No information as to whether engineering fees would be credited in case of contract award (proposal for $560,000 included engineering fees).

A further Purchase Order for $14,454.00 was issued on March 26, 2008 for engineering services – assessment of effluent disposal options (see Exhibit STP-6).

July 14 and 16, 2008

Municipal Council passed the following motion:

“Whereas the Acting Public Works Manager – Engineering has reviewed previous studies completed by ECOfluid and by the Municipality; and
Whereas the Acting Public Works Manager – Engineering has corresponded with the project manager for ECOfluid and has provided recommendations,
Be it resolved that staff be directed to work with the consultants to complete the design build Phase 1 study for a plant that is triple the existing capacity…”

On July 16, 2008 the Snug Cove Sewer Management Committee Further discussed the need for an expanded collection system:

“The Municipality is trying to adapt the sewer system to the reality of densifying the village and is the rationale for tripling the capacity. It was noted that once money is spent for an expanded plant, it would be of little or no benefit unless there is an expanded collection system. The Committee has discussed the need for this expansion for years and recommends that Council consider the areas requiring an expanded collection system. Councillor Frinton believed more consideration was needed on a collection system. He suggested a workshop on the issue of costs and who pays for such a collection system/infrastructure system.”

For reference, see Exhibit STP-7 (pages 2-3, 4-5).

March 19, 2009

At the meeting of the Snug Cove Sewer Management Committee, the Director of Financing presented an amended 2009 Five Year Financial Plan dated March 18, 2009 (see Exhibit STP-8). This plan had some surprising news.

On page 2 of the Plan reference is made to “Effluent Disposal – Enhancements” for an estimated cost of $400,000. This appears to be very special enhancement, considering that the original quote already included a “water reclamation upgrade to Class A water reuse capacity” suitable for irrigation at a cost of $150,000. Questions arise. Do the “enhancements” for $400,000 include the previously quoted $150,000? Or are those costs in addition, which would bring the total to $550,000 for “enhancement”? No specifications or other information had been provided to explain the difference.

Page 2 of the Plan also referred to “Sludge Thickening and Sewer Plant Expansion” which combined arrive at $750,000 – not much out line with previous budget numbers.

However, also on page 2 of the Plan we learned for the first time that a Collection  System Extension at a cost of $1,134,875 was also included in the budget, depending on the success of a Build Canada Grant approval. The Municipality was to contribute 1/3 (i.e. $355,333). That was very good news indeed.

Based on page 2 of the Plan, the numbers were as follows:

Page 6 arrives at $2,301,875 as the proposed budget for 2009.

April 27, 2009

Something quite amazing happened (see Exhibit STP-9).

The 2009 Five Year Financial Plan, which had been amended just one month earlier, was further amended BY COUNCIL, which resulted in a number of remarkable changes.

A further unexpected, and potentially very damaging surprise – the capacity of the expanded sewer treatment plant would no longer be tripled, but only doubled, contrary to Council’s motion of July 14, 2008 (see under July 14 and 16, 2008 above).

But most remarkable are the 5 lines of notes at the bottom of page 2 of the revised 2009 Plan, which state:

“BIM’s contribution to the funding is to be by way of securing debt financing – This will require a public assent process such as a referendum as BIM in this instance is acting as developer (to market Community Lands) – therefore the cost of the financing that relates to the excess capacity created by these works – will be borne by BIM – General Operating. However a mechanism for recovery such as a latecomers agreement will be part of the overall plan – to ensure that there is opportunity for the general tax payer to recover these funds from the new connectible or benefiting lands in the future.”

It seems that the writer wanted to make it absolutely clear that funding for the sewer treatment plant expansion needed to be raised by way of debt (not general revenue), which in turn would require taxpayers’ consent. The note further is very clear that the Municipality is the developer and will depend on recovering taxpayers’ money by cost recovery measures.

Obviously, cost recovery depends on the development of lands served by the sewer treatment plant by way of latecomer charges or Development Cost Charges under which the total costs are divided by the number of units which can be served. Since the increased capacity of the sewer plant is now only half of what it was supposed to be (e.g., 100 to 120 units instead of 200 to 240 units), the resulting costs per unit will be double (e.g., total costs divided by 100 instead of 200). Considering that in this scenario the Municipality is acting as the major developer, the Municipality’s decision to lower the capacity from “triple” to “double” will have a serious impact on the Municipality’s general revenue.

December 9, 2009

At the meeting of the Snug Cove Sewer Management Committee, the Committee members received a copy of the Contribution Agreement between the Province and the Municipality dated August 25, 2008 as part of the Towns for Tomorrow Program (see Exhibit STP-10).

The Committee also received “Project Cost Estimates and Proposed Financing” which arrived at a total cost of $1,752,177 (see Exhibit STP-11).

The accounting includes $271,050 for engineering, which is remarkable considering that the original response to the Request for Proposal was $63,895 (included engineering). Obviously much was added to the original proposal, but additional engineering costs in excess of $200,000 are remarkable!

Equally remarkable is $216,840 for contingency. Where did that money go – or where will it go – and for what additional costs incurred by whom?

At that December 9 meeting, the Committee also received a “Memorandum Re: Infrastructure Works In and Around Snug Cove” dated December 7, 2009 from Committee members Bill Hamilton and Wolfgang Duntz (see Exhibit STP-12).

The memorandum laid out the infrastructure works needed to facilitate any development of the Community/Surplus Lands. Very little has been done since December 2009 regarding these works, and consequently the issues remain virtually unaddressed – which makes the closing paragraph of the memorandum painfully current:

“In closing, we want to stress the point that all deliberations about initiatives by the Municipality-appointed committees or civic groups run the risk of being further frustrated because of delays until the very first and fundamental steps, namely the required infrastructure works, are in place or underway. We are of the opinion that the required infrastructure works, therefore, deserve the Municipality’s highest priority at this time.”

March 15, 2010

At the meeting of the Snug Cove Sewer Management Committee, the Committee members received as On-Table Items an updated Five Year Financial Plan dated March 15, 2010 (see Exhibit STP-13).

The Plan indicated that the total costs for the sewer plant extension were expected to be $2,289,349 – for a project with an initial budget of $740,000!

I would like to direct attention to parts of the 10-line note on page 2:

“It is BIM’s intention to recover the costs of this investment from the lands that will benefit from this excess capacity – through either Latecomers Fees or Development Cost Charges.”

That statement is remarkable. Because the lands that will benefit from this excess capacity are primarily the Surplus/Community Lands, the Municipality will have to recover costs from itself since it is the developer of those lands. Further, since the plant now only has double capacity, there is not much excess capacity (if any) for lands beyond – and therefore cost recoveries from Development Cost Charges or Latecomer Charges from adjacent lands are either no longer available or will reduce the development potential of the Surplus/Community Lands accordingly.

April 5, 2011

At the meeting of the Snug Cove Sewer Management Committee, a new Proposed Five Year Financial Plan dated April 4, 2011 was submitted as Item 7.1 of the Agenda (see Exhibit STP-14).

The new financial Plan did not include much new, except that there is no provision whatsoever for the years 2012 to 2015 in regard to an extension of the Collection System. Remarkably, a new $2,289,000 sewage treatment plant has been constructed without a collection system!

Not including the sewer collection system!

Conclusion

This is just a brief description of the history of the sewage treatment plant expansion starting in April 2007 up to April 2011.

The plant, which had to be completed by March 31, 2011 to ensure reimbursement of costs by grants (see Exhibit STP-10), is still not completed as of mid-November 2011, despite an earlier granted extension to the end of October 2011.

An analysis of how this project was handled by the Municipality raises serious questions which, due to time constraints, I plan to post tomorrow.