COMMISSION REPORT MACRO

RECOMMENDATIONS

It is recommended that the Commission:

1. Receive this report for information, noting that:

· in a September 13, 2004 report to the Commission, TTC staff stated that the cost of the St. Clair Streetcar Project would be in the range of $55 to $65 million, depending on the cost of required property acquisitions, the details of final design, and the magnitude of civil works required;

· that report explained that these costs would cover the construction and implementation of new reserved streetcar lanes on St. Clair Avenue, installing new centre-pole overhead wiring, installing new streetcar platforms and shelters, widening and improving major intersections to accommodate new, bigger platforms and new left-turn lanes for traffic, acquiring property as required, replacing and upgrading traffic signals, undertaking improvements to the condition of St. Clair Avenue, improving the appearance of local landmarks and streetscapes, and other related City-building initiatives, all of which are enumerated in this report;

· the currently-projected final costs (EFC) for these aspects of the project, which are those contained in the original environmental assessment report, remain at $65 million;

· there are additional costs which are being incurred as a result of the judicial review of the project imposed by Save Our St. Clair (SOS). These additional costs, which are entirely attributable to the disruption to the project caused by the judicial review, were not originally foreseen or budgeted for, and include legal costs, construction contract penalties resulting from the court order to stop work, delay-related inflation, the cost of mitigating construction disruption at Yonge/St. Clair, and the additional costs of replacing streetcars with buses for a longer-than-planned period of time. These externally-driven costs, estimated at $2.7 million (mostly delay-related inflation) are over and above the originally-budgeted EFC for the project;

· the St. Clair Streetcar Project budget never included money for the project’s planned new off-street parking facilities because the Toronto Parking Authority, which would build these new lots, is a self-financing agency of the City of Toronto which funds its capital program independently using revenues from its parking lot operations;

· the full cost of the St.Clair Streetcar Project is now included in the TTC’s capital program as a result of the budget approach recommended by the Budget Advisory Committee, at its meeting of November 17, 2005, to transfer the City’s original $20 million share of the project costs to the TTC in order to allow for single-agency cost accounting;

· there are four additional discretionary features which were not included in the original environmental assessment recommendations nor in the original budget, but which would contribute significantly to creating an attractive pedestrian, retailing, and urban environment which, in turn, would contribute to Toronto’s “Beautiful City” campaign. These are:

– re-paving the entire surface of St. Clair Avenue West, from Yonge Street to Gunn’s Road, in order to create an improved travel corridor and enhanced appearance (approximate additional cost = $5 million);

– re-constructing all of the sidewalks over this same section of St. Clair Avenue to create a unified urban design and improved appearance of the pedestrian and open spaces (approximate additional cost = $3 million);

– re-locating all hydro wires over this section of St.Clair Avenue underground in order to reduce visual clutter on the street (approximate additional cost = $15 million); and

– replacing all regular street lighting and poles (a portion of which is substandard) with new, improved decorative lighting (approximate additional cost = $7 million);

Incorporation of any of these discretionary features would require the approval of additional funding for this project, which would be over and above the original EFC and current budget for the project; and,

2. Forward this report to the City of Toronto Budget Advisory Committee and Policy and Finance Committee.

FUNDING

This report outlines the current budget status of the St. Clair Streetcar Project within the TTC’s capital budget.

On September 28, 29, 30, and October 1, 2004, City Council approved the St. Clair Avenue West Transit Improvement Environmental Assessment Project in the amount of $65 million. This project included the TTC’s state-of-good-repair track replacement, streetcar right-of-way costs, and City-related corridor improvement costs. Funds totalling $45.2 million were included in the TTC’s 2005-2009 capital program budget as approved by City of Toronto Council on February 23, 2005 ($25.2 million for track and special track work and $20 million for right-of-way and related costs). Limited funds were included in the TTC’s capital program for right-of-way improvement and treatment costs because it was understood that the City would be including funds in its 2005 capital budget for this purpose.

In the proposed TTC’s 2006-2010 capital program budget, to be considered by the Commission on November 28, 2005, funding of $45.71 million (including inflation, as described in this report) has been included for the St. Clair Right-of-Way project. In addition, as recommended by the Budget Advisory Committee on November 17, 2005, an additional $20 million has been added to the TTC’s capital budget to cover the City portion of the right-of-way costs and to consolidate all funding for this project in one budget.

BACKGROUND

In early November, 2005, City of Toronto Finance staff released the Budget Analyst’s notes, which noted that the Transportation costs of the St. Clair Streetcar Project were being included in TTC’s revised 5-year capital plan in order to make it easier to track the City-wide cost of this major project by Council. At its meeting of November 10, 2005, the City’s Budget Advisory Committee (BAC) reviewed the budget for the St. Clair Streetcar Project, noting the difference in TTC and City staff treatment of the project costs, and requested that BAC members meet with representatives of City Finance, Transportation, and TTC, and report to the BAC wrap-up meeting on the amount required for the St. Clair Streetcar project.

At its meeting of November 17, 2005, the Budget Advisory Committee reviewed information from City Finance which suggested that the estimated final cost of the project had changed from what was originally budgeted. In the BAC Decision Document for that meeting, it was recommended under item 10 (A) 6 that “the St. Clair right-of-way budget contained in the Wrap-Up Notes to Budget Advisory Committee be approved in principle, subject to the Deputy City Manager and Chief Financial Officer reporting to the Policy and Finance Committee and Council on the exact figures.”. This report responds to that request.

DISCUSSION

Originally-Projected and Current Projections of the Cost of the Project

The St. Clair Transit Improvement Environmental Assessment Study was presented to a joint meeting of the TTC, City Works Committee, and City Planning and Transportation Committee on September 13, 2004. The report was approved by the Commission and both committees.

The September 13, 2004 TTC staff report explained that the cost of the project was projected to be in the range of $55 to $65 million, depending on the cost of required property acquisition, the details of the final design, and the nature of the civil work required (road modifications, intersection improvements, etc.) all of which would be known only after detailed engineering work was completed. The report explained that the projected costs would cover the construction and implementation of new reserved streetcar lanes on St. Clair Avenue, installing new centre-pole overhead wiring, installing new streetcar platforms and shelters, widening and improving major intersections to accommodate new, bigger platforms and new left-turn lanes for traffic, acquiring property as required, replacing and upgrading traffic signals, undertaking improvements to the condition of St. Clair Avenue, improving the appearance of local landmarks and streetscapes, and other related City-building initiatives.

The St. Clair Streetcar Project always included the provision of new off-street parking lots to be provided by the Toronto Parking Authority, but this cost was never included in the project budget because the Toronto Parking Authority is a self-financing agency of the City of Toronto whose capital projects are funded through revenues from its parking lot operations. This independent funding arrangement is reflected in one of the recommendations contained in Policy and Finance Committee report #7, which read: “…that Council request that the Toronto Parking Authority, in order to allocate up to $6 million in 2005-2006 for necessary replacement parking to address the parking deficiencies identified in the Hillcrest Village BIA, St. Clair West BIA, Corso Itala BIA areas specifically, be requested to amend its capital budget submission to that effect;“ (reference minutes of City Council meeting of September 28, 29, 30, and October 1, 2004).

The TTC staff report noted that the St. Clair Streetcar Project entailed more than just track replacement; it would also include various improvements to pedestrian spaces, substandard street lighting, trees and landscaping, local landmarks, etc., all of which would contribute to the broader goal of city building and beautification. The report recognized that, because of these broader city-building objectives, the money required for the project would be treated as one integrated budget, and would not be broken down along traditional departmental lines and responsibilities. This would ensure that the project would be executed in a coordinated, integrated way, with no A, B, C, or D taking actions or measures which would be inconsistent with the broader plan. It had been decided that the TTC would be responsible for $45 million of the total project cost, and the City for $20 million, the logic being that the base cost of rebuilding the streetcar tracks, creating the raised right-of-way, installing new platforms and shelters, and relocating the overhead wiring on central poles, would amount to approximately $35 million, and the cost of the other improvements would be borne largely by the City, with the TTC contributing a lesser amount for necessary intersection improvements and urban environmental improvements.

In the City staff report on this subject, which was approved by City Council at its meeting of September 28, 29, 30, and October 1, 2004, the funding section identified and discussed only those funds which had, up to that point in time, already been budgeted or committed or identified for inclusion in a departmental 2006 budget -- a total of $57 million. It was intended that the remainder of the required funding – approximately $8 million -- would be included in the appropriate City departmental 2006 budgets when they would go before Council.

The current projected costs of the St. Clair Streetcar Project remain consistent with the originally-projected cost of $65 million, aside from additional costs being imposed on the project by the judicial review. The project costs, and how the money would be spent, are presented in Exhibit 1, attached. Detailed engineering has been completed for most of Phase 1 of the project, and this more-thorough work identified a specific civic works issue (temporary relocation of traffic signals) which had been omitted from the original budget. Taking this cost into account, together with the actual construction costs contained in the bids from contractors, and an offsetting reduction to the project’s contingency provisions, the estimated final cost (EFC) for the project remains at the originally-projected $65 million. However, as described in the next section, additional costs, which are completely outside the control of the TTC and City, are and will be incurred, and these costs are over and above the originally-projected EFC for the project.

Cost Implications of the Judicial Review

The most vocal opposition to the establishment of reserved streetcar lanes on St. Clair Avenue was a group called Save Our St. Clair (SOS). When the Minister of the Environment rejected SOS’s request for more work on the environmental assessment, SOS requested a judicial review of Council’s authority to undertake the project. This legal proceeding is proving to be unusually complex and time-consuming and, while this issue is before the courts, the project, whose construction was started in October 2005, has been stopped and is on hold.

As a result of this uncontrollable situation, the project is incurring additional costs which were never planned or budgeted for. These are:

· legal costs associated with the judicial review process;

· contract penalties which result from the court’s decision that the project should not proceed and the associated requirement to suspend the contract construction work which was already underway;

· the cost of replacing streetcars with buses for a longer-than-planned period of time because the streetcar tracks had begun to be dug up and rebuilt and, with construction suspended, the streetcar tracks are not usable;

· the cost of restoring the intersection of Yonge Street/St. Clair Avenue to a safe and operable condition pending resumption of the construction work which was halted; and,

· inflation of costs resulting from the fact that work scheduled for this year will now have to be done in 2006, and the work scheduled for 2006 will have to be shifted to 2007. Additionally, construction material and equipment which were ordered and on property for use in 2005 are currently sitting unused, and there is a cost associated with the TTC carrying these materials.

The cumulative financial effect of this externally-driven disruption and delay to the project is estimated at $2.7 million, the majority of which is attributable to delay-related cost inflation. These costs were not in the original budget and are over and above the originally-projected EFC for the project.

Other Side Issues

As the St. Clair Streetcar Project has evolved through successive budget cycles, decisions were made to aggregate certain costs, which were never part of the St. Clair project, into that project’s budget because some of these costs could arguably be related to the project. For example, the cost of rebuilding the streetcar tracks and roadway surface within the underground bus and streetcar loop of St. Clair West Subway Station – a cost of approximately $3.0 million which was originally contained in the TTC’s state-of-good-repair budget – was moved into the St. Clair Streetcar project during the 2005–2009 budget preparation. However, while this maintenance work is indirectly related to the St. Clair streetcar service, it is, in fact, separate and independent of the right-of-way project because these repairs would be required whether or not the right-of-way project were to proceed.

In order to avoid confusion and the appearance that the St. Clair project’s budget is increasing, the cost of such maintenance work is being removed from the St.Clair Streetcar Project budget and is being put back into the TTC’s state-of-good-repair budget where it was originally.

Cash Flows for the Project

Exhibit 2, attached, shows the project cash flow for the St. Clair Streetcar Project, based on the EFC of $65 million, and on an assumption that all the legal matters will have been cleared up by spring, 2006 and that construction will resume in the summer of 2006. It is currently expected that Phase 1 of the project, covering the section between Yonge Street and Bathurst Street, will be completed in the 2006 construction season, and that Phase 2, from Bathurst Street to Gunns Road, will be completed in the 2007 construction season. These cash flows could change if the 2006 construction start date is significantly different from June/July, 2006.

Consolidation of the Project’s Budget into One Agency

At the Budget Advisory meeting of November 17, 2005, it was recommended that the TTC alone should budget for the $65 million cost of the St. Clair Streetcar Project. While the project continues to be a broad City-building exercise which is supported by both the City and the TTC, it was felt that consolidating the budget responsibilities under one agency would simplify the budgeting and accounting aspects of the project, and would allow primary project management to be located in one area.

Discretionary Components which are Over and Above the Project’s Original Scope

When the St. Clair Avenue West Transit Improvement Environmental Assessment Study was undertaken, and its design elements initially developed, the objective was that, upon completion of the project, the urban, pedestrian, and public realm spaces on St. Clair would be more attractive and aesthetically-pleasing than before the project. In support of this objective, and in order to limit the cost of project, the original scope and budget for the project, as prepared during the EA, kept to a minimum the amount of infrastructure which would be replaced, rebuilt, or upgraded.

However, during the course of public consultation regarding the detailed design of the project, and in the context of the detailed engineering for the project, four additional elements, which would be over and above the original project scope and budget, were identified which would contribute significantly to the enhancement of the finished product in terms of pedestrian, retail, and public open space environments on St. Clair Avenue West. These additional elements are consistent with Toronto’s “Beautiful City” initiative and would bring a notably fresh, new, more-open look to the street. These four items are:

· re-paving the entire surface of St. Clair Avenue West, from Yonge Street to Gunn’s Road, in order to create an improved travel corridor and enhanced appearance (approximate additional cost = $5 million);

· re-constructing all of the sidewalks over this same section of St. Clair Avenue to create a unified urban design and improved appearance of the pedestrian and open spaces (approximate additional cost = $3 million);

· re-locating all hydro wires, over this section of St.Clair, underground in order to reduce visual clutter on the street (approximate additional cost = $15 million); and

· replacing all regular street lighting and poles (a portion of which is substandard) with new, improved decorative lighting (approximate additional cost = $7 million);

These discretionary features were not part of the original scope of the St. Clair Streetcar Project and are not part of the currently-approved budget for the project. Therefore, a decision to incorporate any of these features would require the approval of additional funding for this project, which would be over and above the original EFC and current budget for the project.

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November 22, 2005

11-55-80

Attachments: Exhibit 1 and 2

Exhibit 2

St.Clair Streetcar Project

Projected Cash Flows * ($000’s)

Component	2003	2004	2005	2006	2007	EFC

Tangent Track		$22	$2,300	$3,800	$12,611	$18,733
Special Track		$952	$239	$2,179	$3,782	$7,152
Civil/Landscape/ Right-of-Way	$82	$556	$2,000	$16,000	$20,477	$39,115
Total	$82	$1,530	$4,539	$21,979	$36,870	$65,000
Costs from Judicial Review						$ 2,750
Total						$67,750

* based on EFC of $65 million

Exhibit 1 St. Clair Streetcar Project Budget: Estimated Final Cost

STREETCAR RIGHT-OF-WAY

Trackwork (Contractor)	$ 13,500,000
TTC Labour/Material	$ 9,500,000
Platforms	$ 2,000,000
Electrical	$ 6,300,000
Center Poles (Procurement)	$ 750,000

CIVIL / INFRASTRUCTURE

Roadwork	$ 9,350,000
Sidewalks	$ 1,500,000
Traffic Signals	$ 3,300,000
Street lighting	$ 500,000
Retaining Walls	$ 500,000
Utility Relocations	$ 1,500,000

URBAN & PEDESTRIAN AMENITIES

Streetscaping	$ 2,000,000
Shelters	$ 2,850,000
Crosswalks	$ 1,200,000
Public Art	$ 500,000
Trees	$ 250,000
Special Sites	$ 1,500,000

PROPERTY ACQUISITION ENGINEERING	$ 5,000,000

Engineering (City)	$ 2,000,000
Engineering (Consultant)	$ 1,000,000

Estimated Final Cost (bASED ON ORIGINAL SCOPE).	$ 65,000,000

Additional Cost Implications of Judicial Review (Estimated)	$ 2,750,000
Total Including Judicial Review Costs	$ 67,750,000