Toronto Transit Commission - Procurement Authorization

- Excavation and Paving 1998 Surface Track Program

(City Council on October 1 and 2, 1998, deferred consideration of this Clause to the next regular meeting of Council scheduled to be held on October 28, 1998.)

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(Clause No. 26 of Report No. 18 of The Strategic Policies and Priorities Committee)

The Strategic Policies and Priorities Committee submits, without recommendation, the transmittal letter (September 23, 1998) from the City Clerk.

The Strategic Policies and Priorities Committee reports having requested the City Clerk to report directly to Council on October 1 and 2, 1998, on whether or not the action recommended in the report (September 23, 1998) from the Chief Financial Officer and Treasurer would be a reconsideration of Council's action respecting the Capital Budget.

The Strategic Policies and Priorities Committee submits the following transmittal letter (September 23, 1998) from the Budget Committee:

Recommendations:

The Budget Committee on September 23, 1998 recommended to the Strategic Policies and Priorities Committee, and Council, the adoption of the joint report (September 17, 1998) from the Chief Administrative Officer and the Chief Financial Officer and Treasurer, wherein it recommended that:

(1)additional financing approval in the amount of $2,223 thousand for the TTC capital project No. 120 Subway Track be granted to cover the road reconstruction portion of the surface track work;

(2)an increase to the total 1998 net expenditure of the TTC capital program in the amount of $1,891 thousand be approved, representing the budgeted amount for this purpose in the 1997 capital budgets of Metro Transportation and the former City of Toronto; and

(3)the remaining $332 thousand, to complete the total TTC request for this project, be transferred from other 1998 projects with anticipated underexpenditures, and that the TTC identify the projects to be reduced and report back to the Budget Committee.

The Budget Committee reports having requested the Chief Financial Officer and Treasurer:

(a)to report to the Strategic Policies and Priorities Committee on September 24, 1998 on the financing of this project and whether the amount that needs to be debentured falls within the $110 million; and

(b)to submit a report during the 1999 - 2003 Capital Budget Review Process, providing details on the 1998 approved Toronto Transit Commission Budget along with any additional items that were subsequently approved by City Council.

Background:

The Budget Committee on September 23, 1998, had before it the following:

(a)a transmittal letter (September 8, 1998) from the City Clerk forwarding recommendations adopted by the Urban Environment and Development Committee on September 8, 1998; and

(b)a joint report (September 17, 1998) from the Chief Administrative Officer and the Chief Financial Officer and Treasurer regarding the issue of inter-departmental and inter-agency cost allocations with respect to this program.

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(Transmittal letter dated September 8, 1998, addressed to the

Budget Committee from the Urban Environment

and Development Committee)

Recommendations:

The Urban Environment and Development Committee on September 8, 1998, recommended that:

(1)additional project financing approval in the amount of $2,223,000.00 be granted to City Project No.120 of the Toronto Transit Commission, "Surface Track"; and

(2)the TTC's approved 1998 Capital Program be increased by a corresponding amount to cover the road reconstruction portion of the surface track work.

The Urban Environment and Development Committee reports, for the information of the BudgetCommittee, having requested the Chief Administrative Officer to submit a report directly to the Budget Committee, for consideration with this matter at its meeting on September 15, 1998, regarding the issue of inter-departmental and inter-agency cost allocations with respect to this Program.

Background:

The Urban Environment and Development Committee had before it the following communications:

(i)(August 20, 1998) from the General Secretary, Toronto Transit Commission advising that the Commission on August 19, 1998, approved the recommendations contained in Report No.(10), entitled "Procurement Authorization - Excavation and Paving 1998 Surface Track Program".

(ii)(April 23, 1998) addressed to the Chief General Manager, Toronto Transit Commission, from the Interim Functional Lead, Transportation, regarding TTC track rehabilitation projects.

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(Communication dated August 20, 1998 addressed to

the City Clerk from the

General Secretary, Toronto Transit Commission)

At its meeting on Wednesday, August 19, 1998, the Toronto Transit Commission considered the attached report, entitled "Procurement Authorization - Excavation and Paving 1998 Surface Track Program."

The Commission approved the Recommendations contained in the above report, as listed below:

"It is recommended that the Commission:

(1)approve the issuance of a Purchase Order in the total upset limit amount of $3,802,000.00 to the City of Toronto Works and Emergency Services Department for the Commission's cost of excavation and paving within the track allowance. This work will be completed by the City of Toronto in 1998; and

(2)forward this report to the City of Toronto requesting an increase in the TTC's approved 1998 Capital Program in the amount of $2,223,000.00 and a corresponding increase in project approval to reflect the downloading of costs from the City to the TTC for the road reconstruction portion of the surface track work (this work has traditionally been funded through the City's Transportation Department's budget); and

(3)note that this work is proceeding at this time since deferral of the work would impact the ability to complete the work in a timely and cost-efficient manner."

The foregoing is forwarded to City of Toronto Council for the necessary approval, as detailed in the report.

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(Toronto Transit Commission Report No. 10 dated August 19, 1998

entitled "Procurement Authorization - Excavation and Paving

1998 Surface Track Program.".)

Recommendations:

It is recommended that the Commission:

(1)approve the issuance of a Purchase Order in the total upset limit amount of $3,802,000.00 to the City of Toronto Works and Emergency Services Department for the Commission's cost of excavation and paving within the track allowance. This work will be completed by the City of Toronto in 1998; and

(2)forward this report to the City of Toronto requesting an increase in the TTC's approved 1998 Capital Program in the amount of $2,223,000.00 and a corresponding increase in project approval to reflect the downloading of costs from the City to the TTC for the road reconstruction portion of the surface track work (this work has traditionally been funded through the City's Transportation Department's budget); and

(3)note that this work is proceeding at this time since deferral of the work would impact the ability to complete the work in a timely and cost-efficient manner.

Funding:

There are insufficient funds to accommodate the downloading impact of City costs in the 1998-2002 Capital Program under 1.2 Surface Track Replacement Program and Surface - Special Trackwork Replacement Program, as set out on pages 31-51 in the "State of Good Repair" category. A total amount of $1,579,000.00 was budgeted for excavation and paving in 1998, leaving a shortfall of $2,223,000.00 as a result of City downloading.

The TTC's 1999-2003 Capital Program will include sufficient expenditure estimates to accommodate the cost of the work downloaded from the City's budget to the TTC's budget. The downloading of the costs amounts to an increase of $28.8 million in the TTC's 1998-2002 budget envelope.

Background:

Each year sections of the Streetcar network are rehabilitated by the Commission in conjunction with the City of Toronto (formerly Metro Transportation and City of Toronto). Under this arrangement the Municipalities provided technical assistance with the project while funding a portion of the roadway costs under a cost-sharing formula. In 1998, the City of Toronto withdrew previously committed funds from this program.

In order to maintain the Streetcar tracks in a state of good repair, it is necessary to proceed with these projects as originally planned, absorbing the City of Toronto excavation and paving costs associated with this work (see attached letter dated April 7, 1998).

Discussion:

There are six surface track locations and five special trackwork locations scheduled in 1998 within the City of Toronto jurisdiction. No change in the scope or schedule of the program was made from budget. The Commission's portion of the cost for excavation and paving work within the track allowance at these locations is estimated by the City of Toronto Works and Emergency Services Department at an upset limit amount of $3,802,000.00.

Justification:

In order to maintain the Commission's surface track system in a state of good repair, it is necessary to proceed with this work in 1998.

Approval is also necessary to enable payment for the Commission's portion of the excavation and paving costs, including the impact of City downloading.

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(Letter dated April 7, 1998, addressed to

the Commissioner of Works and Emergency Services, City of Toronto,

from the Chief General Manager, Toronto Transit Commission,

regarding Funding of TTC Track Rehabilitation Projects.)

In our March 30, 1998, correspondence regarding Joint Track Rehabilitation Projects, we discussed initiating and completing surface track replacement and track allowance projects, at 100 percent our expense, independent of the City except where there is a mutual interest in jointly completing a section of track/roadway. As discussed with Messrs. J. Marcinek and J. Niedra of your staff, due to the inability of the City to continue the traditional cost-sharing arrangements, the TTC is prepared to assume the City's portion of the track allowance costs for the projects highlighted on the attached Surface Trackwork Rehabilitation Projects schedule. The withdrawal of your share of the costs will have an impact on our budget; this impact is currently being reviewed and will be identified in our 1999-2003 Capital Program.

Specifically, the projects involved are both Lakeshore tangent projects including the special trackwork at Kipling, the Dundas tangent project including the special trackwork at Parliament, and the Coxwell tangent project including the special trackwork at Gerrard. It is understood that only items within the track allowance will be covered, and these costs should be in the order of magnitude of the estimates provided by your staff (attached) plus approximately 25 percent overhead costs (i.e.,planning, inspection, administration fees, etc.). It is further understood that some escalation of costs on the Coxwell project is to be expected, as this will be the test bed for a new construction methodology utilizing a temporary turnout. The traditional cost-sharing arrangements will continue in place for all remaining projects.

Please instruct your staff to design and tender all works in order to meet the construction dates outlined on the attached Surface Trackwork Rehabilitation Projects schedule for 1998.

Should you have any questions or concerns with the aforementioned, please contact Mr. Jim Teeple, Superintendent - Streetcar Way at 393-2067.

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Coxwell Avenue from Lower Gerrard Street to Upper Gerrard Street

Estimated CostTTC ShareCity Share

Reconstruct Track Allowance$400,000.00$200,000.00$200,000.00

Overlay Adjacent Pavement60,000.0060,000.00

Sidewalk and Curb Repairs30,000.0030,000.00

Reconstruction of intersection100,000.0050,000.0050,000.00

Total$590,000.00$250,000.00$340,000.00

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(Communication dated April 23, 1998, addressed to

the Chief General Manager, Toronto Transit Commission,

from the Interim Functional Lead, Transportation

regarding TTC Track Rehabilitation Projects.)

In response to your letters dated March 30, 1998 and April 7, 1998, we acknowledge that the TTC is willing to fund the entire cost for the Coxwell project, both Lake Shore Boulevard West projects, and the two Dundas Street East projects in the 1998 Track Rehabilitation Program. Our staff is currently in the process of preparing contract documents and will be tendering the work in an effort to meet the 1998 work schedule.

For subsequent years, you have proposed that the TTC initiate, fund (100 percent) and complete all surface track replacement and track allowance projects. We would support this proposal in principle but recognize that there are numerous responsibilities and details that still need to be clarified to ensure safe and effective program implementation. Some of these are as follows:

(i)responsibility for the different aspects in developing, approving, designing, tendering and administering the Track Rehabilitation Program;

(ii)responsibility for maintenance of the track allowance;

(iii)responsibility for quality control of materials and workmanship;

(iv)co-ordination of joint road/track allowance reconstruction projects; and

(v)co-ordination of all utility work within the road right-of-way.

We look forward to meeting with your staff to discuss these issues and any others that the TTC wishes to bring forward. Please contact Mr. John Marcinek, P. Eng., Project Manager, Construction at 392-8342, as he will be representing the City of Toronto regarding this matter.

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(Joint report dated September 17, 1998, addressed to the

Budget Committee from the Chief Administrative Officer and

Chief Financial Officer and Treasurer)

Purpose:

To provide for the increase in TTC capital expenditures resulting from full funding by the TTC of the road reconstruction portion of the surface track work in 1998, formerly funded from the Transportation Department budget.

Funding Sources, Financial Implications and Impact Statement:

The recommendations in this report would increase the approved 1998 Capital Program of the TTC by $1.891 million to be financed by the issuance of debentures, if required.

Recommendations:

It is recommended that:

(1)additional financing approval in the amount of $2,223 thousand for the TTC capital project No. 120 Subway Track be granted to cover the road reconstruction portion of the surface track work;

(2)an increase to the total 1998 net expenditure of the TTC capital program in the amount of $1,891 thousand be approved, representing the budgeted amount for this purpose in the 1997 capital budgets of MetroTransportation and the former City of Toronto; and

(3)the remaining $332 thousand, to complete the total TTC request for this project, be transferred from other 1998 projects with anticipated underexpenditures, and that the TTC identify the projects to be reduced and report back to the Budget Committee.

Council Reference/Background/History:

The Urban Environment and Development Committee, on September 8, 1998, recommended that additional project financing approval in the amount of $2,223 thousand be granted to Project #120 of the TTC, "Surface Track", and that the TTC's approved 1998 Capital Program be increased by a corresponding amount to cover the road reconstruction portion of the surface track work.

The UEDC also requested the CAO to submit a report directly to the Budget Committee, for consideration with this matter, regarding the issue of inter-departmental and inter-agency cost allocations with respect to this Program.

Comments and/or Discussion and/or Justification:

Before 1998, through an arrangement between the TTC, Metro and the local municipalities, the rehabilitation of the streetcar network was funded under a cost-sharing formula. Accordingly, in 1997, the approved capital budgets of the former City of Toronto and Metro included a total budget of $3,147 thousand for road reconstruction/track rehabilitation, with $1,256 thousand recovered from the TTC. Therefore, the municipal contribution for this program in 1997 was $1,891 thousand. No contributions were however budgeted in 1998.

In a letter to the Acting Executive Commissioner of Emergency and Protective Services dated March 30, 1998, the TTC indicated its intention to initiate and complete surface track replacement and track allowance projects at 100 per cent its expense. The purpose of the transfer of funding and responsibility to the TTC was to ensure that the track rehabilitation program be primarily driven by the requirements of the surface track replacement.

The participation of several entities in the funding of these activities, with different sets of priorities, among other reasons, resulted in a slower than required rate of rehabilitation according to the TTC assessment. The TTC indicated that a new approach was required in order for the Commission to achieve its objective of maintaining the streetcar network in a state of good repair. The TTC also indicated that with the centralized control and funding, unit costs for track rehabilitation will fall from $940.00 per D.T.F. (Double Track Foot) to $900.00 per D.T.F. However, due to the deferral in the track rehabilitation, it is anticipated that the TTC will request a significant increase in the funding for this project in its 1999-2003 capital budget submission.

An agreement was reached between the TTC and the Transportation Department that the Commission would fully fund and control all future street car rehabilitation projects. However, the transfer of funding from the original budget of the Transportation Department to the TTC budget was not realized through the 1998 budget process. In addition, as already indicated, the Transportation Department budget did not include any expenditure for this purpose in its 1998 capital program. Therefore there is no 1998 approved funding that could be transferred to the TTC for this project.

However, based on the objective of ensuring an ongoing level of maintenance of the City infrastructure, it is recommended that additional funding for the road reconstruction portion of the surface track work be approved at the same level of the 1997 capital budget ($1,891 thousand). The $332 thousand shortfall as compared to the TTC request should be funded, if required, from underexpenditures in the TTC 1998 capital program.

Conclusions:

The TTC has indicated its intention to centralize the control and funding of the surface track replacement and track allowance projects, to better achieve the objective of maintaining the streetcar network in a state of good repair. An agreement on this matter was reached between the TTC and the Transportation Department.

However, no transfer of funds was realized through the 1998 budget process and there is no 1998 approved funding that could be transferred to the TTC for this project. It is therefore recommended that additional funding for the road reconstructions portion of the surface track work be approved at the same level of the 1997 capital budget ($1,891 thousand), and that the $332 thousand shortfall as compared to the TTC request be funded from TTC 1998 underexpenditures.

Contact Name:

Shekhar Prasad, tel: 392-8095, fax: 392-3649

internet e-mail: shekhar-prasad@metrodesk,metrotor.on.ca

The Strategic Policies and Priorities Committee also submits the following report (September23, 1998) from the Chief Financial Officer and Treasurer:

Purpose:

To outline the responsibilities of a Municipal Council under Provincial Legislation as it pertains to the Annual Debt and Obligation Limit.

Funding Sources, Financial Implications and Impact Statement:

Not Applicable.

Recommendations:

It is recommended that:

The report "Toronto Transit Commission -Excavation and Paving 1998 Surface Track Program", as considered by the Budget Committee at its meeting held on September 23, 1998, be amended by the following "that the approved 1998 Capital Program of the TTC be increased by $1.891 million and that it be financed through the issuance of debentures for a term not exceeding twenty years and that the amount is within the City's updated debt and financial obligation limit."

Council Reference/Background/History:

At its meeting held on September 23, 1998, the Budget Committee considered the report "Toronto Transit Commission - Excavation and Paving 1998 Surface Track Program". The report required the following amendment "that the approved 1998 Capital Program of the TTC be increased by $1.891 million and that it be financed through the issuance of debentures for a term not exceeding twenty years and that the amount is within the City's updated debt and financial obligation limit."

Comments and/or Discussion and/or Justification:

Prior to January 1, 1993, if the financing of a capital expenditure approved by City Council required the issuance of long-term debt, approval of the Ontario Municipal Board (OMB) was required before commencement of the project. Final Council approval of the capital program and related borrowing authorities were granted when the OMB was satisfied that the long-term obligations were within the financial capacity of the municipality.

Effective January 1, 1993, the role of the OMB in monitoring the issuance of debt by municipalities was greatly diminished with the introduction by the Province of a new borrowing procedure for issuing municipal debentures. The Ministry of Municipal Affairs and Housing assumed a level of supervision by calculating an annual debt and financial obligation limit for each Ontario municipality, setting a ceiling on the total amount of new debt that can be issued. It is calculated by taking 25 per cent. of the municipality's own-source revenue and subtracting existing debt charges and other long-term commitments such as leases in order to arrive at the level of allowable new debt charges. This amount is capitalized over the debt's average term-to-maturity. The resultant amount is the debt and financial obligation limit and represents the total amount of new debt that is permitted to be issued to finance approved capital projects. Only if the debt and obligation limit is exceeded does a municipality have to apply to the OMB for approval.

Based on the Provincially imposed limit, the City of Toronto's annual repayment limit for new long-term commitments is $654,033,748.00 for 1998 that translates into $3.5 billion of allowable debenture issuance. The debt and financial obligation limit is not a measure of the affordability of the debt by the municipality. In fact, the City's interim capital financing policy approved during the 1998 capital budget review is much more restrictive than that approved by the Province. The policy limits borrowing so that no more than 10 per cent. of the City's property tax revenues are required for debt repayment. The actual approved 1998 level was significantly below this level, at about 7.5 per cent. To maintain the level of debt charges at a constant rate would require the City to cap its average annual borrowing for tax supported capital works over the next five years at $110 million, excluding that required for the Sheppard subway. The borrowing projected at the time of approval of the 1998 capital program was $131 million. If the additional $1.891 million for this project is approved, debenturing of that amount would be required, which would have an annualized impact on the operating budget from debt charges of approximately $200 thousand.

Issues pertaining to capital financing and debt will be addressed in the Debt Management Report, which is being drafted as part of the capital budgeting process.

Contact Name and Phone Number:

Martin Willschick, Manager, Treasury - 392-8072

E-mail: mwillsch@mta1.metrodesk.metrotor.on.ca

(A copy of the Surface Trackwork Rehabilitation Projects schedule for 1998, which was appended to the letter dated April 7, 1998, from the Chief General Manager, Toronto Transit Commission, has been forwarded to all Members of Council, and a copy thereof is also on file in the office of the City Clerk.)