City Councillors devoted around $1.6 million from reserves to fund projects which had their budgets balloon as a result of inflationary costs. (File Photo/NanaimoNewsNOW)

By Alex Rawnsley

pricey projects

Inflation forces $1.6M in cost increases for City of Nanaimo projects

Mar 17, 2023 | 5:23 AM

NANAIMO — Plentiful reserves have helped bail the City out of a sticky financial spot.

During a Wednesday, March 15 finance and audit committee meeting, Council provisionally approved extra spending on four different items totalling roughly $1.6 million. Final approval must still be given at a future Council meeting, but the items will likely not be debated further.

Bill Sims, general manager of engineering and public works said inflation pressure on pricing “shakes your confidence” in future project estimates.

“We’re very conscious of the dramatic increase. A lot of these prices were put in less than a year ago and we felt confident at that, we had some contingency built in and we’re still coming in over budget, it’s quite discouraging, it’s very difficult to pin down.”

Pending phase two upgrades to the Albert/Fourth St. complete streets project, which includes a large amount of underground infrastructure, requires an extra $550,793.

Shorthanded

Clippers fall short hosting Bulldogs

2h ago

off the schedule

BC Ferries preemptively cancels early Saturday sailings

9h ago

firm handshake

B.C. NDP government, Greens reach 'shared priorities' agreement

12h ago

The total cost of the project is now roughly $4.4 million dollars, of which half is devoted to underground infrastructure work along Albert St. and intersecting Pine St.

A further $1.3 million is earmarked for roadworks, retaining walls and street lighting while approximately $900,000 will pay for sidewalks and dedicated cycle lanes.

It adds to phase one work completed in summer 2022 and aims to connect VIU to the downtown through active transportation lanes, while conducting needed underground infrastructure work.

Total funding for the project is a mixture of City money and grants.

A water and sewer upgrades in Departure Bay need an additional $558,602 while a new fire truck for Nanaimo Fire Rescue in 2025 is coming in $341,318 over budget.

All of the additions are on top of previously approved amounts.

Reserves are typically built through unspent taxation money, including the one per cent annual asset management charge on property taxes.

Additional funding sources including DCC’s, or development cost charges, also contribute.

Money from private development is paid to the City to fund projects in the neighbourhood, including required infrastructure upgrades as a result of increasing population.

“With the large amount of growth disbursed all over the city, there’s a number of sewer DCC projects that are feeling the pressure,” Sims added. “We need to upgrade sewers to allow for this growth and the structure of the DCC bylaw stretches the construction of the sewers out over a long period of time.”

The juggling of projects is falling on the City’s finance department to not only balance the numbers but also balance requests from various departments.

Laura Mercer, City director of finance, told NanaimoNewsNOW they look upwards of 10 years ahead at where money might need to be allocated to fund required upgrades.

“…and choose the best funding source to find any overages. The department’s come in saying ‘okay, our tender came in and it’s over budget, we need more dollars’, then it’s the finance department…who determines what the best source of funding for that is.”

Reserve accounts for the City have various rules on what they can be used for while some have minimum balances which must be kept.

To begin replenishing the accounts, Mercer successfully lobbied Council to deposit approximately $8.9 million from a 2022 operating surplus into various reserve accounts.

The money was mainly a result of a number of unfilled City and RCMP positions as well as better-than-expected investment returns thanks to increasing interest rates.

“Now that we’re going into our final 2023-2027 financial plan, which we’ll be bringing to Council next month, we’ve gone back and recalculated what our expected interest income is and that is going to have a positive effect on the tax increase, which we’re still calculating.”

Three million was put into the RCMP Contract Reserve, to prepare for anticipated wage increases for officers once a new contract is agreed to.

The remainder was put into other reserves designed for everything from property purchasing to special initiatives and snow removal.

Mayor Leonard Krog said they’re trying to be as efficient as possible, and financially conservative by combining required underground upgrades with surface level improvements.

“It makes incredible sense to undertake those kinds of improvements at the same time you’ve dug up the street, so to speak, and are doing all the underground work which nobody every sees and candidly many people pay no attention to until it stops working or a pipe explodes or there’s water running down your street.”

Krog said in comparison to other cities, Nanaimo is financially in good shape having borrowed only around 15 per cent of what they’re allowed to borrow by the province.

Join the conversation. Submit your letter to NanaimoNewsNOW and be included on The Water Cooler, our letters to the editor feature.

info@nanaimonewsnow.com

On Twitter: @NanaimoNewsNOW