Double or nothing

By Mark Squibb/January 6, 2023

Just weeks after council approved tax increases for 2023, some Paradise councillors are already worried they may have to increase taxes again next year following approval of a big infrastructure project that came in at double its original estimate.

The project is the replacement of infamous Lift Station No. 10 at the corner of Topsail Road and St. Thomas Line, which blew a gasket in 2019, spraying a nearby home with raw sewage.

The malfunction cost the Town over $1.5 million in unplanned expenses, as pumper trucks were called in to trudge sewage from the lift station round the clock, in addition to repairs, maintenance, and staff overtime costs.

Last July, council passed a motion to proceed with the design of a new lift station to replace No. 10. The estimated cost at that time was $12.6 million.

“Since that decision, the design of the new lift station has been completed and an open tender call to construct it was issued and closed on November 1,” councillor Deborah Quilty told her colleagues during their December 20 meeting.

Staff had expected higher bids, Quilty added, noting a pre-tender estimate that accounted for volatile and changing market trends put the new price at around $16.9 million.

But the actual bids proved much, much more than that.

Three companies bid on the tender; one bid came in at $23.6 million, another at $26.6 million, and a third at $27.9 million.

“The significant difference between the pre-tender estimate and the tender results was not expected, and was cause for significant bid analysis and review of the project needs,” said Quilty. “The project’s major costs are dictated by the removal and placement of very large quantities of materials under difficult conditions which are directly impacted by fuel prices. Those fuel prices have fluctuated significantly this year and rose to an all time high after the tender closed. The project also has a lot of equipment and material that has been impacted by shortages, long delivery times, and rising prices. The prices quoted reflect the uncertainty the industry is seeing and the level of risk that contracts have to try and mitigate on long term projects.”

Quilty said given the quotes are so similar, the numbers accurately reflect current market conditions.

The bad news didn’t stop there.

“There are a number of indicators that prices are likely to increase for a while yet,” said Quilty. Meanwhile, the Town’s consultant analyzed the bids and recommended council go with the lowest qualified bidder.

Quilty said the Town has $3.5 million in multi-year capital works cost shared funding available to put towards the project, as well as $2.4 million in other government funding. Council has also allocated sufficient funds to cover the cost of borrowing to cover the rest of the plant’s cost, she added, before putting forward a motion to award the project to Olympic Construction for $23.5 million.

That led to much discussion around the council chamber.

“This lift station services roughly 70 percent of the town, and is one of the biggest in the province,” said Deputy Mayor Kimberley Street. “The decision to award this contract is a big decision and has not been taken lightly. I’ve spent a lot of time going through every document and attended meetings for discussion, as all of council has.”

According to Street, the existing lift station was built in 2003, with a 20-year life expectancy. Paradise’s population growth, however, far surpassed expectations, and the system was forced to work harder than it was designed to work — resulting in the 2019 malfunction.

“An abundance of repairs and maintenance has been ongoing for many years, and we have recently experienced a catastrophic failure, and we have been told that there will come a day when history will repeat itself, meaning another catastrophic failure,” said Street. “So, there are significant risks if we don’t move forward with a solution to Lift Station 10. Something has to be done.”

Street noted the last council was presented with three options: replace the lift station; increase the level of service using existing and new parts and create a clearing for staff to fix issues as they arrive; or replace certain parts and continue making repairs as the need arises.

That first option was the one selected, she said, and it’s still the direction the Town should go.

“We were all shocked when the tender prices came back, as it was a considerable increase,” said Street.

But holding off, she argued, would lead to greater delays, possibly even higher tender costs, and the risk of an even greater failure than was experienced in 2019.

“I think the best information to give residents is that during the most recent failure, the Town was in emergency response mode for over two months before we could even determine what had failed,” said Street. “For two months, a considerable amount of money was spent on the emergency response, and, to add, there were residents in the area dealing with back ups, residents that were unable to get much sleep for weeks on end due to the noise of the pumping trucks, which were going 24/7, and which could be heard for kilometres, (causing) health and safety concerns in the area, and so on.”

A new plant, said Street, would allow the station to operate even after any number of possible failures, greatly reducing — or eliminating— the need for emergency responses all together, should any issues arise.

Street allowed if the money being asked for now was for a recreation facility, such as a pool, her response would be, “Not right now, lets put this on pause.” But given the necessity of the lift station and the problems posed by another possible malfunction, it is “too great a problem to pause.”

Councillor Larry Vaters, like Street, thanked staff for keeping council up to date on the details.

“This is a challenging decision, and one that bears risks with proceeding, or without proceeding,” said Vaters. “I’ve invested significant time into making my decision. I’ve certainly asked many questions and have had in depth discussions. Fundamentally, it comes down to risk tolerance, risk management, and risk perspective. But this risk also has to be calculated at a time of high inflation, high interest rates, and market volatility. There are financial, operational, residential, and strategic perspectives that have to be analysed, all at a time when there are unknowns.”

Vaters argued that given the tender prices for construction of a new lift station, it is time for council to switch lanes.

“I understand the rationale behind choosing option three (to build a new station), and likely would have supported it, had I been on council at that time,” said Vaters. “That said, as time changes, things change. And what has really changed here is the cost.”

He said that even accounting for government funding, Paradise residents will be on the hook for at least $17.6 million.

“This means that there is potential, and I say potential, not guaranteed, of tax, and water and sewer fee implications for residents, and that is before factoring the high potential for change orders,” said Vaters, adding that change orders typically push project costs up an additional 10 percent.

“So, if we’re using $23.6 million as a baseline, that’s another $2.36 million that taxpayers could be responsible for,” said Vaters. “Residents are already faced with a moderate mil rate and water and sewer fee increase. This is on top of exorbitant fuel costs, continuously rising food costs, and increases in interest and mortgage rates.”

He said given the pressure already on households, and a number of projects already in the Town’s line of sight, he was against awarding the tender.

Next spoke councillor Glen Carew, who begged council’s indulgence as there would be some overlap with Vater’s address.

“My decision on this particular motion tonight certainly wasn’t made easily,” said Carew. “There were certainly many factors, and a considerable amount of technical data had to be digested, deciphered, and considered. We had a number of meetings, one quite contentious, I might add, and I have found myself thinking about it constantly since the RFP closed in October.”

He said the proposed plant is a “Cadillac of a lift station,” that would address all current and future needs of the town for the next 50 years and comes complete with all the bells and whistles.

“I will say, if I had been a member of council at that time, based upon the data, I most likely would have voted in favour of bringing this RFP forward,” admitted Carew.

But the new numbers change things.

Carew added that in addition to the likelihood of higher costs due to change orders, any other overruns would be the financial responsibility of the Town, not the other levels of government.

On top of that, Carew noted, the Town has been advised that any further increases to the cost of supplies may be passed on to the Town by the contractor.

Carew added the consultant has also advised that replacement of Lift Station No. 10 will not resolve issues with the force main, which has suffered six failures in recent years.

“This work will need to be completed in the future, as it appears it will be the Achilles heel of the new system,” said Carew.

That work would be in addition to the $23.6 million cost of the new lift station.

“Your Worship, for me, this comes down to cost — unprecedented, extraordinary, astronomical, inflationary cost — and a financial burden that will unfortunately have to be absorbed by our residents,” said Carew. “We find ourselves voting for the Cadillac option, when what we need is the Kia option — something reliable, dependable, and affordable.”

Carew said he would be voting against the motion and hoping for a Christmas miracle to resolve the problem.

In contrast to Street, Carew, and Vaters, councillor Elizabeth Laurie promised to keep her comments short and sweet.

“We’ve been dealing with this issue since July of 2019,” said Laurie. “I’ve had a long time to digest this whole entire issue. Yes, it is very unfortunate that it has come in so high over budget. But your Worship, for me, this is a no brainer. As the deputy mayor has said, 70 percent of our town’s capacity comes from lift station 10. Would you want 70 percent of your residents to not be able to flush their toilets next week? This is going to be a problem and they’re not going to care how much it costs to fix, they will want it fixed. We have all of the professional people whose job – and it’s not my job, I can’t come up with solutions, they’re the ones that get paid to do this, they’re the ones trained and educated in this type of field – and they’re telling us that this is the best option for us, and so I am in agreement that this is the best option for us. Unfortunately, it is a lot more money, but that is unfortunately the time we are in. I don’t think we can afford not to take any action right now. I think it’s irresponsible of us not to move forward with this project, knowing the risks that we have been told.”

It then fell back to Quilty to close the debate.

“Like councillor Carew, I’ve been thinking about this ever since this figure came in,” said Quilty. “Nobody was expecting this cost. And as I read in the memo earlier, with rising costs and the way things are these days, the price of everything has gone up, and has escalated to the point where sometimes it is unmanageable. But in this particular instance, we had a major catastrophe sitting over there on the corner of St. Thomas Line and Paradise Road, and I don’t want to see that happen again. To go back now and revisit all of the information that we were provided, I think we have to make the decision to move ahead, as councillor Laurie said, to move ahead with this particular project, get it started, and get it done, so that we can provide the services the residents of Paradise deserve. As councillors, we have the responsibility to be responsible to residents for their safety, their amenities, and the services that we have to provide.”

As to Budget 2024, Quilty said councillors will have to “sharpen their pencils,” to avoid potential tax increases.

“If someone recommends an increase in services that we are providing here today, my answer is ‘No.’” said Quilty “We’ll sharpen our pencils. If it’s programming, or a new building, or whatever the case is, that comes from Recreation or Public Works or Planning, I don’t really care what department it comes from, we have to ensure that the residents are able to cope with the increase we have here by not increasing the mil rate next year. There are ways and means of doing this.”

Quilty said this is the single biggest expenditure made by any council during her 28-year tenure.

Mayor Dan Bobbett then offered councillor Patrick Martin, who attended the meeting by teleconference due to illness, to share his thoughts before calling the vote.

“To be quite honest with the public and with the council, I came to this meeting tonight even though I was really sick, because I knew that this would be a contentious issue,” said Martin. “Councillor Laurie pretty much summed it up. If 70 precent of residents will not be able to flush their toilets, if we have a catastrophe again, it’s a big problem. And like she said, they’ won’t care what the cost is. They’ll want it fixed.”

Put to a vote, Carew and Vaters voted against awarding the tender, while Street, Laurie, Martin, and Quilty voted in favour.

There was no word on when construction will start.