Decision postponed

Council seeks certainty about developer’s commitment before awarding tender

Adecision about what to do with the proposed trunk lines under the Millennium Trail will have to wait a few more weeks. Approximately 100 County residents filled the pews in Council Chambers and spilled into the hallways and overflow rooms at Shire Hall on Tuesday to voice their opposition to the spending of millions more dollars for the benefit of a developer in Wellington.

BACKGROUND
On the table was a tender to build water and sewer trunk lines across the breadth of Wellington. The low bid under consideration totalled $19.4 million, including taxes, contingency, project administration and management. A sewage pumping station—not considered in the Master Servicing Plan (MSP)—is estimated to add another $6 million to the total cost of the trunk lines. The MSP calculated the cost of trunk lines to be about $16 million before taxes. The staff report before council acknowledged that the bid is higher than budgeted in the MSP.

Most residents had come to urge Council to pause—to encourage their representatives to recognize that the new homebuilding market has changed and to stop adding more risk and debt upon existing waterworks users—at least, until the developer in Wellington puts its money on the table.

The developer signed an agreement two years ago to pay its development charges upfront to help fund the waterworks infrastructure it needs. (According to the report, the DC funds payable once the subdivision agreement is executed is $26.5 million.) In exchange, the municipality held the remaining capacity in the waterworks system—about 321 homes— exclusively for this developer for these past two years. The terms of that deal stipulated that the developer had 18 months to enter into a subdivision agreement. In May, Shire Hall reported that a subdivision agreement was imminent. But over the summer, the story was revised to ‘the developer will move forward when the trunk line is approved.’ By last week’s meeting, the story had changed again. Now, it would sign the agreement and pay its share of the infrastructure in the second quarter of next year—after the pumping station is designed and the tender awarded.

By then, existing waterworks customers will have spent $44 million on infrastructure, primarily for this developer. Meanwhile, the developer has put up just $4 million by way of a letter of credit.

As a former council member and others noted later in the meeting, it is unclear whether the County has any means to compel the developer to pay its contribution until it is ready to build homes—which could be many years away.

The developer didn’t attend the meeting, but sent a letter saying it was ready to build as soon as the trunk lines and pumping station were built.

COMMUNITY VOICE

Most residents want the developer to pay its development charges upfront, as agreed—before awarding this tender—before spending any more money. Many don’t believe the developer is building in the foreseeable future—that it has held these farm fields for 17 years and that it will be patient and wait until market conditions turn favourable again before it turns over sod.

Others want the County to reclaim the waterworks capacity allocation from this developer and negotiate with another builder in the village.

MAKING THE CASE
Not everyone presenting on Tuesday was opposed to awarding the tender, however.

A lawyer for the Base31 developers told Council that it should seize this opportunity. Paul DeMelo’s client wants to build thousands of homes on the Heights above Picton. Their plans include getting water piped from Wellington.

Paul DeMelo said his client was fully committed to moving forward, but made no concrete proposals or funding commitments. Instead, DeMelo told Council that the County’s infrastructure needed upgrading whether development comes or not and that his client would pay its share. He didn’t offer any guidance about when or how much.

Councillor Brad Nieman wanted to know why DeMelo—representing a developer in Picton— was speaking to a trunk line tender in Wellington. DeMelo was clear. His client wants to see a signal from the council that it is putting money in the ground in preparation for its development.

“[Wellington’s trunk line approval] shows the council’s commitment to working with partners in the development community so that when the growth is coming, the infrastructure is going to be in place to accommodate that,” said DeMelo.

Former councillor Mike Harper also spoke in favour of awarding the tender. He said he trusted staff when he was on council—when the MSP was approved—and he trusts them now. He suggested that the province or the developer could force the County to put these pipes in the ground. He noted, too, that the upfront DC financing agreements had won awards for innovation. He said protecting ratepayers from financial burden has always been Shire Hall’s number one concern.

URGING A PAUSE AND RESET
Other speakers, however, pointed to County water bills—among the highest in Canada—as evidence that ratepayers may not be top of mind among these decision-makers, most of whom aren’t customers of the waterworks system and don’t pay a water bill.

Helen Prolas underlined this point. Prolas leads an organization representing 975 residents of Wellington on the Lake who have serious concerns about financial risk and exposure to this project.

“As Mr. DeMelo so eloquently put it, County ratepayers pay among the highest water and wastewater rates in Canada,” said Prolas.

Prolas added that the underlying rationale for expanding Wellington’s waterworks was to support growth. But she noted that both market conditions and a recent regional study by the County’s consulting demographer suggest much slower growth than previously thought.

“What’s the big rush? Stop and reassess,” urged Prolas. “We have a water supply that is the envy of the world, but water bills that are the envy of none.”

Kevin Hanbury noted that Wellington waterworks has the capacity for three to five years of building.

“There is no need to go ahead and put trunk lines in the ground right now,” said Hanbury. He proposed instead to transfer this capacity to an infill developer rather than build homes on farm fields north of the Millennium Trail.

He noted that a letter from Kaitlin—received by Council that day—was not a guarantee. He said that prefinancing agreements must be revised to get more money upfront.

“Currently, they put too much risk on existing users and none on the developer,” said Hanbury.

Andy Bowers is a professional engineer who has worked on waterworks across Canada and the world. He urged Council to take a purposeful pause to develop a rational consensus on the quantities of water needed and the time basis for each component. Such a calculation would dictate the terms of system expansion and timing. He cautioned that overbuilt waterworks are inherently inefficient.

Tim Good has two decades of experience managing large-scale projects. He says the project plan driving the massive waterworks expansion is truly flawed.

“The Wellington water tower is over budget,” said Good. “The equalization tank is over budget, but we don’t know how much because the final numbers aren’t in. The trunk lines before you tonight are double the estimated cost in 2021. You should take a pause right now.”

He urged Council to review the assumptions used in the 2020 MSP and go through every line item.

“You must then ask yourself, does this still make sense? I can guarantee you the $100 million estimate is no longer $100 million. Then you have to ask yourselves, ‘Can we afford to keep going?’”

Good then pointed to the absence of revenue to pay down this debt.

“The entire success of this project is based on receiving development charges upfront to pay a large portion of this expenditure,” observed Good. “We are almost $50 million in but have not received any development fees. Has anyone shown you a schedule of when these fees are paid? You should have had this in 2020—it is the entire premise of the project.”

Jennifer Armstrong is a 22-year-old who has lived in Wellington her entire life. She would like to stay and build a life for herself here.

“I don’t see a way for me to afford to stay,” said Armstrong. “I am part of the working group with the developer. They have shown no interest and made no commitment to housing that people my age, or seniors on a fixed income, can afford.”

She says Council should not be funding waterworks without assurance that the developer builds affordable homes.

“There are already enough barriers for me to stay here; please don’t erect another,” said Armstrong. “Put a pause on this decision until we get an adequate answer on affordable housing.”

Ron Waslenko says ratepayers are overwhelmed. They can’t afford to fund hundreds of millions of dollars of infrastructure for developers.

“My waterbill is staggering,” said Waslenko. “People are going to say enough is enough, and they will move. I can’t afford it.”

A WAY FORWARD
Ernie Margetson is a former councillor and a former County engineer. He spoke last.

“I agree that the water and sanitary lines must ultimately be installed,” said Margetson. “So it is not an if, but when?”

But Margetson says the awarding of the tender must be tied to the execution of the subdivision agreement.

“I am saying that when you approve this tender, I would like to see the subdivision agreement signed on the same day,” said Margetson. “Then you know you are going to get those upfront funds. If the County is to proceed with the frontend financing of this next phase, which they have done on the first two—the water tower and the surge tank or equalization tank—then I feel that they must be assured, with confidence, that the developer is willing to make their contribution.”

Margetson says nothing in the agreements signed with the developer compels it to sign a subdivision agreement. He noted that it has had draft approval for years. He believes it is only fair that the awarding of the trunk line tender be linked to the subdivision agreement and the subsequent triggering of $26.4 million in upfront development charges.

He says the agreement requires a provision added that legally binds both sides.

“There is no guarantee they will sign,” said Margetson, pointing to the upfront financing agreement. “They haven’t specifically said we will sign a subdivision agreement; we will post the final lands approved prepayment. I think we need a special provision in the agreement that legally binds both sides.”

It’s about fairness, according to Margetson.

“We are working in good faith,” said Margetson. “We are over budget on every component, but still moving ahead. Saying to the developer that we will pause here until we have a subdivision agreement is a fair deal.”

COUNCIL DECISION
When the matter came before Council for a decision later in the evening, Mayor Steve Ferguson acknowledged that the arguments presented warranted further examination.

“I think it is fair to everyone here this evening that we get answers to these questions, that our position is bullet-proof,” said Mayor Ferguson. “These are big projects. We should be armed with as much information as we can get.”

He turned to Wellington councillor Corey Engelsdorfer, who moved to refer the matter to a December 19 meeting to allow staff and its municipal solicitor to respond to the issues raised and the opportunities presented.

Councillor John Hirsch summarized the purpose of the December 19 meeting.

“I think Ernie Margetson’s idea is a good one,” said Hirsch. “There needs to be a guarantee that our understanding about upfront payments really does work. The day we sign the tender is the day we get the cheque from Kaitlin. We need this kind of certainty.”

Hirsch added that Council, like the general public, still doesn’t have a good overall picture of the entire project and the interdependencies. He hoped such an update would be produced for this meeting.

Council voted unanimously to refer the decision to a December 19 meeting.