The price tag for Orillia’s Recreation Centre is rising again.
On Monday, city council agreed to increase the contingency for the $55-million project on West Street South by an additional $650,000.
Councillors expressed frustration about the request for more money - the third such request in less than two years.
“When does it come to the point where we’re tapped out and we say we can’t give any more to the contingency?” asked Coun. Rob Kloostra.
“Is this it? Is this enough to open” the facility? He asked.
Coun. Jay Fallis said it’s “quite unfortunate” to be in this situation, noting “many around the (virtual) table are very frustrated” by the situation.
The frustration has mounted over the past 20 months as the project has been beset by delays; this is the third time council has increased the contingency fund for the facility that was originally slated to open almost two years ago.
When the project started, a $2-million contingency fund was established. That represented 4% of the project cost even though a minimum 5% contingency is recommended for large-scale capital projects - more for a project like this being built on a brownfield.
Contingencies are used to address issues that arise once construction activities begin, that were unknown and/or outside the scope of the original construction tender documentation, city staff noted in a report.
In the summer of 2018, council approved an additional $850,000 to the contingency "to account for extra costs associated with site conditions." That brought the total contingency to 5.6 per cent.
Then, in January of 2019, council approved an additional $975,000 for the contingency fund, raising the percentage of the overall budget to about 7%.
Monday’s additional funding raises that contingency above 8% - or twice as much as originally earmarked.
Ray Merkley, the city’s director of parks, recreation and culture, said this should be the final request.
“We’re very close to the end of the project,” Merkley told councillors at Monday’s virtual budget committee meeting. “The number of surprises should be very few if any … We certainly anticipate this will be the final request.”
As of mid-April, staff said $3,131,306 of the $3,285,000 contingency had been spent, leaving just $153,000 remaining.
If council didn’t approve the increase, staff would be forced to come back to council each time an issue arises, which could stall construction and further drive up costs, said Merkley.
As a result, council approved the increase - although reluctantly.
“If we don’t support this, the recreation centre is not going to open,” lamented Coun. Mason Ainsworth, noting this is “a logical step” in the process.
“If we don’t (agree to the contingency fund increase) it could be a lot more expensive in the future,” said Ainsworth, reiterating what he said the last two times the fund was increased: “I really do hope this is the last time.”
There is a silver lining. The increase will not directly increase taxes. The city, several years ago, created a reserve fund to build up money to cover operating costs for the new aquatic centre.
The city has “saved” almost $500,000 this year on operating costs because the facility has not yet opened.
That money will be used to fund the increase in the contingency; the remaining funds ($166,000) will come from the Major Facilities Capital Maintenance Reserve.
In addition, staff is hopeful some of this money will be recouped down the road.
“There are a couple of site work items that our consultants believe are the responsibility of the contractor which may require mediation or settlement,” noted a report to council.
The pandemic is also having an impact, noted the report.
“There is current uncertainty with the provincial and municipal emergency declarations in place,” said the report, noting there is 35% fewer workers this past week compared to the first two months of 2020.
“It’s difficult to determine how much of this decrease is due to COVID-19 precautions versus a natural decrease based on work completion,” said the report.
Mayor Steve Clarke conceded the contingency fund should have been set at a higher percentage of the overall budget from the outset.
“We are really, really close to the end of this project,” said the Mayor. “I sure as heck hope we don’t have to come back and visit this again.”
