Date: February 2, 1998

To: Corporate Services Committee

From: Acting Commissioner of Corporate Services

Subject: Capital Budget Funding for Facilities

Purpose:

To provide information on the funding required for capital maintenance for the City of Toronto=s facilities.

Funding Sources:

Capital Budget.

Recommendations:

It is recommended that:

(1) funding, in the amount of $19.2 million be provided in the 1998 Capital Budget at a minimum to cover the critical health and safety issues , conditions which, if not immediately addressed, could lead to costly damage and deterioration of municipal properties, as well as to actions to eliminate conditions which lead to energy waste thus creating energy savings, as identified in the body of this report; and

(2) the Commissioner of Corporate Services report to the Corporate Services Committee within six months on a comprehensive long term strategy for the capital maintenance of all the property assets of the new City of Toronto, including alternative funding arrangements.

Background:

The Budget Committee, at its meeting of January 26, 1998, considered the report dated January 19 from the Chief Financial Officer and Treasurer, A1998 Capital Works Program - Preliminary Targets@. The report recommended that the interim Capital Management Guidelines include the following:

The total value of the property asset portfolio of the City of Toronto is over $7.5 billion, and includes over 6000 properties and 1200 buildings, excluding housing, and is therefore a major asset for the City.

The Facilities Management Capital Budget submission as summarized in the attached appendix (1) was compiled by each of the Facilities Management functions of the seven municipalities over the past several months. This function has been organized somewhat differently in each of the seven municipalities. Consequently the scope of services to be offered by a consolidated Facilities Management Group has not yet been fully clarified. The submission includes those projects which have historically been the responsibility of the Facilities Management function in each of the seven municipalities. Some of these projects may also have been submitted by other program areas as well.

This report does not comment on the items now listed under other programs. For the time being we are working with the staff of the Finance Department to ensure that a facilities priority is only included once and there is no duplication, and that for the 1999 budget the Facilities priorities will be coordinated and be consolidated for more effective operations. This report, therefore, deals only with the funding issues related to the items presently proposed to be included under the Facilities Program. It includes most of the capital maintenance items for all buildings under all programs in the former City of Toronto buildings, as well as municipally owned facilities from the other municipalities including Civic Centres, Police Buildings, Welfare Offices, some Libraries and some Parks and Recreation Facilities. The total requirements identified for 1998 are approximately $34.5 million based on known capital maintenance needs as identified in each municipality.

Funding at close to historic levels in some programs such as Police and Parks and Recreation complicates facilities maintenance concerns and in some cases allows for, as an example, interior renovations to be funded (Police) but no capital funding to make the necessary heating, ventilation and air conditioning changes required as a result of the interior renovations. In crowded facilities this can result in poor air quality, reduced productivity and increased health related concerns.

Report #3, Clause #3 to the Budget Committee of January 26, 1998, recommended that the target for the facilities program be $4 million net. The report included the following comments regarding the target of $4 million:

While the Budget Committee did not adopt the report, it did adopt a list of emergency items for interim funding, including funding for Old City Hall and Casa Loma and a few other small projects totaling $2.1 million, half of the net target of $4 million that was proposed in the report by the Chief Financial Officer and Treasurer. This essentially eliminates part of the $9.5 million that has been identified as critical health and safety requirements (A1) in the Facilities Management submission, not to mention $1.3 million as a further contribution to further energy savings (A,3).

Comments:

(1) 1998 funding needed for capital maintenance for facilities

Much work has already been done to develop and coordinate priorities for 1998 funding under the Facilities program. Each former municipality reviewed its multi year plans for the maintenance of all its buildings and put forward its priorities for 1998. No funding was allocated for buildings that were anticipated not to be needed in the future. In addition, these items have now been reviewed and consolidated under categories by the firm of Cole Sherman Consulting Engineers, which was commissioned by the Transition Team to ensure a common basis for priority setting across all former municipalities (Appendix 1). Cole Sherman worked with staff of all the former municipalities, who support the categories used and conclusions.

The lists of categories and funding needed under each is attached as Appendix A. The Categories are A1, A2, A3, B1, B2, B3, B4 and C1, C2 and C3, and the total funding represented is $34.5 million. The A category alone totals $19 million. Category A1, Athe elimination of potential cause of injury or death, health and safety and code compliance related issues@, totals $9.5 million. A2, Aelimination of other conditions which, if not immediately corrected, might lead to costly physical damage or deterioration of Municipal property,@ requires $8.5 million. A3, Aelimination of conditions which lead to a waste of energy, cost avoidance@ is $1.3 million.

A severe reduction of funding to only $4 million would therefore result in dangerous conditions, liabilities for the City, the allocation of the funding for emergency repairs only, as well as the lay off of staff who work on capital maintenance projects and manage contracts. Future savings due to energy conservation programs would be severely hampered as well.

(2) Options for funding

Capital maintenance has normally been funded through capital budgets. The former municipalities have been using and exploring other sources. For example, in 1997, the Council of the former City of Toronto adopted a strategy for property asset maintenance, which included setting a basic funding level of $7.5 million and other options to address severe shortfalls of funding in past years, such as a reserve fund using proceeds from the sale of properties and from income from leased properties or surcharges to program fees, use of the Federal Infrastructure Program, using special funding opportunities such as the Better Building Partnership which funds energy saving renovations from future savings. In 1997 the Municipality of Metropolitan Toronto saved $1.3 million as a direct result of an investment in energy conservation projects. To continue such savings continued investment is required.

The Transition Team has requested a report on the establishment of a reserve fund for capital maintenance and this report will be submitted shortly.

Conclusions:

Clearly new additional ways are needed to help fund required maintenance of property assets. A corporate asset management funding strategy is needed that includes a wide range of opportunities that may include reserve funds with different sources of support, debentures, or the use of special funding programs such as for energy savings. In the meantime adequate funding must be provided in the capital budget to ensure that the City=s properties can operate safely in 1998.

Contact:

Cathie Macdonald Art Coles

Interim Functional Lead Real Estate Interim Functional Lead Facilities Management Tel: 392-0449 Fax: 392-0029 Tel: 397-0805 Fax: 397-0825

Acting Executive Commissioner of Corporate Services

APPENDIX 1

SUMMARY OF FINDINGS

COLE SHERMAN REPORT - NOVEMBER 1997

REPORT FOR MEGACITY TRANSITION STUDY

CONDITION SURVEY AND/OR REVIEW OF EXISTING CONDITION SURVEY

OF SELECTED PHYSICAL ASSETS

Each of the seven Metropolitan Toronto Municipalities has a broad range of physical assets of varying ages and stages of repair. These physical assets range from existing buildings to outdoor parks and recreation facilities. The 1998 Budget for each municipality include maintenance and repair of building and facility components. The following is a summary of the 1998 Budgets for each priority ranking category.