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City signed downtown parkade deal ‘written by developer, not vetted by city staff’ – Report

The problems with the vastly over-budget downtown parkade project started pretty much from Day 1.

On January 18, 2018, former city manager Kathleen Soltis signed a cost-plus contract with A&T Project Development for $12.6 million. The agreement, which went before council in late 2017, stipulated that A&T would build the parkade under its housing development next to City Hall and the city would pay for the parkade. Council was told at the time that the $12.6 million cost was $2 million less than what it would cost if they put the project to tender.

What was lacking were the checks and balances, commonly referred to due diligence.

The contract “was prepared by the developer, was not vetted by city staff responsible for procurement matters, and was not brought to the city council for consideration or approval; Identified the preliminary budget for the parkade construction to be $12,012,054, plus five per cent profit and GST; obligated the city to pay to the developer the actual costs of construction of the parkade, plus five per cent on account of the developer’s overhead costs, plus an additional five per cent on account of profit; obligated the city to incur all costs of providing services to the parkade site; and, did not include any limit on the maximum amount payable by the city to the developer,” according to legal review of the parkade project prepared by Young Anderson Barristers and Solicitors.

Costs quickly ballooned out of control and the latest price tag has the project now costing about $32 million.

The first increase came when the number of underground parking stalls jumped from 266 to 288.

“This increase was not identified in the December 11, 2017, staff report to council, and was not otherwise expressly brought to the attention of the city council at the time,” states the Young Anderson report.

On July 3, 2018 A&T informed Ian Wells, the city’s manager of planning and development, of “very large” increases over the preliminary budget relating to water control, steel tariffs, unavailability of trades and materials, other construction matters, which would add close to $7 million to the project.

“There is no record of this information having been communicated to Mayor Lyn Hall or to the city council,” states the report.

On March 1, 2019 a report on the project came before city council, and the $7 million increase was not mentioned. Ten days later, council added the project to its financial plan to the tune of $12.6 million.

A month later, at the request of staff, it changed its delegated authority … the amount the city manager can spend without seeking approval from council. Previously it had been $1 million. The change moved it to five per cent of the city’s total operating budget … roughly $9 million.

On June 14, 2019, a report to council put the cost of the parkade at $12.9 million. Then, on November 5 that year, the cost was reported at $16.3 million.

“There is no explanation in the November 5, 2019, Staff Report to Finance and Audit Committee of the increase in the budget amount for the Parkade from that included in the City’s Financial Plan in March 2019, nor is there any indication that the costs would be approximately $3 million more than the increased budget amount included in the report,” according to the Young Anderson report.

On February 26, 2020, Soltis used her new authority under the city’s Sustainable Finance Guidelines to increase the budget for the parkade by the amount of $5,354,572.18 to reflect the actual costs incurred to the end of December 2019. Six months later, in September, Soltis and the city parted ways.

By November 2020, the city incurred an approximate $4.5 million in additional costs for the parkade, bringing the total cost to approximately $22.5 million.

“To put it simply, the increased costs incurred by the city for the parkade directly flow from the decision made by the city very early on to accept all risk associated with the parkade as the developer had indicated that the economics of the housing project were questionable otherwise,” concludes the Young Anderson report. “Having made that fundamental decision, the city saddled itself with the additional costs it incurred.”

The firm made several recommendations to the city including a detailed review of the city’s project management processes.

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