Sticker shock

Estimated costs to replace HJ McFarland Home skyrocket

Sticker shock. That’s how some members of Council put it at Wednesday’s Committee of the Whole when they were awestruck after being presented with a $93.6 million cost estimate to start building a new 155,000 square foot-long term care building in 2023. Previous estimations in 2019 had the price for the build come in at $62 million.

In June 2019, the Ministry of Long-Term Care announced it would be adding 76 additional beds to the existing 84 beds, creating a 160-bed new build project.

Debt servicing will be required to finance the project, and staff say it is clear that there are significant hurdles in the financing of the new build without additional capital revenue or changes to the way the provincial funding works. The Ministry of Health and Long-Term Care provides one-time funding and a construction funding subsidy to offset the project costs. The estimated one-time funding is $4,933,096, with approximately 95 per cent of those funds being available on substantial completion of the new home. An estimated $985,746 in development charges would go towards the build, leaving the net debt to service at $87,648,830.

The yearly debt payments of the project would be over $5.5 million. The Ministry of Health and Long-Term Care funds $1,258,213 per year for the next 25 years, bringing the yearly debt payments to $4.3 million. The County’s tax levy would have to increase over 10 per cent per year just to finance the debt.

Councillor John Hirsch noted that the County would be on the hook for a larger part of the build. “ The Province is going to really only cover about 31 per cent and we are stuck with the rest based on this new $93 million project?” asked Hirsch.

Kyle Cotton, Executive Director of Long-Term Care, acknowledged that was the case. “Originally in 2019 there was communication that suggested that potentially 60 to 80 per cent of the cost of redevelopment would be covered by the Province. Our current estimations show approximately 30 to 40 per cent is being covered and that is in part due to escalating costs. Construction costs. Supply chain management issues and the like. There is a bit of a delay in the construction funding subsidy from the government,” said Cotton.

“Additional sources of funding need to be found because we just can’t afford this full blown project,” added Hirsch.

Nice-to-haves versus needs were discussed. Councillor Mike Harper wondered if any of the items could be conceded. Cotton explained that due to the COVID-19 pandemic, many items that used to be nice-to-haves are now a necessity. “The nice-to-haves right now are things that have been identified that will improve resident outcomes and improve the safety of our population, including staff and residents,” he said. Cotton explained that staff and management learned through Covid that more space and more opportunity to isolate is key, and things such as dedicated pathways for soiled laundry are now a necessity.

Councillor Bill Roberts asked if there were any front line staff involved in the project team. “These are the people that give 24/7 care to the residents. If there is any group of people who could have some good ideas about new ways of doing things in a new facility it might well be those folks,” said Roberts.

Cotton told council that front line staff have currently been provided with opportunity through general staff meetings and conversations, and have have been able to ask questions about the project.

“As we get further on into the program phases, we want to get their input. Obviously it is very important for our internal and external stakeholders to be involved. They are going to be the ones with boots on the ground doing the work and having their input is invaluable for getting it right,” he said.

Asking about COVID-19, Councillor Ernie Margetson wondered if the increased costs could be linked to changes needed to be made due to the pandemic. “I ask that question in the context as perhaps that might be a reason we get some extra consideration [from the province] if this is a trend throughout the province, if the cost of longterm care facilities is going to increase tremendously.”

Tom Kovendi, Project Manager explained that the increases are mostly due to COVID. “What has happened is construction costs really have been driven up simply because there is such a huge backlog. There is material shortages and material increases. So right now when we are looking at 2023, we have to be very cognizant of the fact that numbers have gone up. We are looking at worst case scenarios,” said Kovendi, who explained that the gross floor area increased due to more space being needed due to COVID.

CAO Marcia Wallace added that the Province is certainly being lobbied to that end. “We are seeing the supply chain pressures driving up a lot of our engineering projects. We are looking at this both from the perspective of residents and staff and how the place operates and also how to manage this as a major capital build and keep it on time and on budget,” said Wallace, who also explained that the pandemic drove expectations even higher. “While we were building a better than average home in the original conversation, the bar is raising. So what better than average looks like in the future is going up.”

“I think what we are all suffering from is a severe case of sticker shock and how we can possibly manage to do everything we would like to do on the budget that we have,” said Councillor Janice Maynard. “How do we redesign this building, although recognizing it will cost more, how do we accomplish a build that is within our ability to fund. I just don’t know how we can do this without having some changes or building in phases.”

Topping agreed that sticker shock hit everyone on this file. “To the point where we reached out to other homes in our area that are also in the state of redevelopment and we compared our project, and we are trending in the same direction as some of those other projects. From an accuracy standpoint we are confident our numbers are coming in true.”

Topping explained that advocacy and maximizing revenue streams is a component staff will be looking a “Ensuring we are meeting the needs of the community as far as bed allotments. What is affordable for the residents going into the home. Those are elements we can look at,” said Topping. “We know from what we have seen, municipal homes have had better outcomes for residents.”

Wallace told Council this was why the report was not asking Council to direct staff to put anything in the budget other than the design work that is already underway. “Harder conversation about a different project would have to come if it truly is unaffordable. We see the next few months as our first step to tackle this. This is the home we think we should be building. What are some of the macro choices in terms of finding a better way to pay for it and some more support provincially in terms of funding and then reassess with council,” said Wallace.

Staff will report back to Council in early 2022.