Pool costs au­dit sought

KL’s new CAO re­quest­ing foren­sic au­diit of pool con­struc­tion project

Northern News (Kirkland Lake) - - FRONT PAGE - BRAD SHERRATT

KIRK­LAND LAKE – Kirk­land Lake Chief Ad­min­is­tra­tive Of­fi­cer Peter Av­goustis is propos­ing the town spend up to $50,000 for an in­de­pen­dent foren­sic au­dit re­lat­ing to the costs of the new pool.

Av­goustis will make a rec­om­men­da­tion at Tues­day night’s coun­cil meet­ing that “coun­cil serve no­tice to the pub­lic that the Chief Ad­min­is­tra­tive Of­fi­cer will be re­quest­ing up to $50,000 to or­der an in­de­pen­dent foren­sic au­dit of all the fund­ing and fi­nan­cial trans­ac­tions re­lated to the aquatic cen­tre which will be made as part of the 2018 bud­get re­quest to com­mence 30 days af­ter 2018 bud­get has been ap­proved.”

In his re­port, Av­goustis will also rec­om­mend “that coun­cil ap­prove an in­crease of $1 mil­lion from $12 mil­lion to $13 mil­lion to the con­struc­tion op­er­at­ing line of credit for the Aquatic Cen­tre.”

He will also rec­om­mend that coun­cil amend the cur­rent agree­ment with Sal­ter­pi­lon Ar­chi­tec­ture and in­crease by $765,000 the con­tract amount from $735,987.50 to up to $1,500,000 +HST.

He will also rec­om­mend that coun­cil serve no­tice to the pub­lic that the Trea­surer will be re­quest­ing up to $150,000 in ad­di­tional op­er­at­ing funds to op­er­ate the new aquatic cen­tre, which will be made as part of the 2018 bud­get re­quest. That coun­cil serve no­tice to the pub­lic that the Trea­surer will be re­quest­ing up to $30,000 in ad­di­tional op­er­at­ing funds as a con­tin­gency to de­com­mis­sion the old pool, which will be made as part of the 2018 bud­get re­quest.”

In his re­port, Av­goustis writes “Af­ter nine years of dis­cus­sion, de­bates and de­ci­sions, the Town of Kirk­land Lake has less than five months re­main­ing to com­plete and com­mis­sion its new aquatic cen­tre. For both fi­nan­cial pru­dency and pub­lic in­ter­est trans­parency the CAO has dis­closed all ‘known’ op­er­at­ing and cap­i­tal fore­casted costs as­so­ci­ated with the aquatic cen­tre at this time based on in­for­ma­tion avail­able as of the date of this re­port.

“At this point in time, staff have iden­ti­fied two ad­di­tional con­struc­tion-re­lated costs as­so­ci­ated with the aquatic cen­tre. The first is an un­bud­geted amount for the in­ter­est to be paid on the con­struc­tion line of credit.

“Pre­lim­i­nary fore­casts es­ti­mate this amount to be any­where be­tween $100,000-$200,000 of payable in­ter­est owed from the ini­tial con­struc­tion loan un­til deben­ture date. This num­ber is ex­pected to fluc­tu­ate up or down, based on the daily prime lend­ing rate and will be fi­nal­ized af­ter the loan has been paid off by the is­suance of the deben­ture. From the in­for­ma­tion made avail­able to the CAO, there is no ex­pla­na­tion as to how or why this was not pre­vi­ously iden­ti­fied, but in the in­ter­est of trans­parency is now be­ing re­ported out.

“The sec­ond item is an un­ex­pected con­struc­tion is­sue re­cently iden­ti­fied dur­ing the 7 Septem­ber 2017 bi-weekly con­struc­tion meet­ing, re­lated to high volt­age ser­vice re­quire­ment com­pleted dur­ing an elec­tri­cal safety au­thor­ity in­spec­tion. Tech­ni­cal de­tails of this item, es­ti­mated cost and ex­pla­na­tion of why this is not in­cluded in the orig­i­nal guar­an­teed max­i­mum price con­tract, are in­cluded in the at­tached let­ters from Sal­ter­pi­lon Ar­chi­tects and Mon­ti­eth Build­ing Group. The es­ti­mated cost is ap­prox­i­mately $190,000 plus HST.

“Both of th­ese iden­ti­fied costs are in ad­di­tion to what has been pre­vi­ously re­ported and have placed all avail­able project con­tin­gen­cies in a deficit sit­u­a­tion re­sult­ing in fi­nan­cially im­pact­ing the prop­erty tax levy.

In or­der to set­tle up all known and in­curred claims and costs, al­low for an ad­di­tional buf­fer for any other ad­di­tional un­known, un­ex­pected or un­bud­geted costs that may still be yet to come, and re­lieve pres­sure from the prop­erty tax levy, and the CAO is re­quest­ing an in­crease of $1 mil­lion to the re­cently passed bor­row­ing limit con­struc­tion line of credit from $12 mil­lion to $13 mil­lion.

“With the in­for­ma­tion avail­able to­day, it is hoped, that this should al­low for the timely com­ple­tion of the project, and as of right now, this in­crease will only be uti­lized to pay the two items as iden­ti­fied above thus re­liev­ing pres­sure from the prop­erty tax levy.

“Any ad­di­tional un­known, un­ex­pected or un­bud­geted costs that do arise be­tween now and com­mis­sion­ing of the new fa­cil­ity will be pub­licly re­ported.”

The CAO said the Sal­ter­pi­lon Ar­chi­tec­ture con­tract is an­other item that is re­quired to be ac­cu­rately re­port out on to re­flect cur­rent ac­crued val­ues and pay­ments made. The orig­i­nal Jan. 12 2016 by-law set the con­tract price at $735,987.50 + HST which was based on a $9.6M pool con­struc­tion es­ti­mate. Since then the pool was ap­proved for a higher con­struc­tion cost and be­cause the Sal­ter­pi­lon Ar­chi­tec­ture con­tract is a per­cent­age of the con­struc­tion cost, the by­law is re­quired to be amended to ad­just the amount.

“The cur­rent amount owed to date is $1,154,660 + HST, an in­crease of ap­prox­i­mately $420,000 from the 12 Jan­uary 2016 by­law.

“How­ever, this amount does not in­clude the ad­di­tional per­cent­age which may be added by the hy­dro volt­age cost­si­den­ti­fied above as staff re­mains in con­tin­ual dis­cus­sions with Sal­ter­pi­lon Ar­chi­tec­ture at the writ­ing of this re­port.

“As pre­vi­ously men­tioned, if the con­struc­tion costs go up, so will this amount with the fi­nal amount not known un­til the com­ple­tion of the project. With the in­for­ma­tion avail­able to­day and with a few more months to com­plete the project the word­ing of the by-law is be­ing re­quested to be amended to “up to $1,500,000” which will pro­vide an up­per ceil­ing on the con­tract, and all for some con­tin­gency.

“To square up what is cur­rently owed, and pro­vide some ad­di­tional con­tin­gency, this re­quest is for an ex­tra $765,000 from the 12 Jan­uary 2016 by-law and the fi­nal price will be re­ported out at the com­ple­tion of the project. All ad­di­tional costs will be paid out of the con­tin­gency from the re­quested up to $13 mil­lion bor­row­ing by-law.

“In the in­ter­est of com­plete trans­parency,” the CAO said he has also dis­closed all `known’ op­er­at­ing fore­casted pro­jec­tions as­so­ci­ated with the aquatic cen­tre again, based on in­for­ma­tion avail­able as of the date of this re­port. This in­cludes the fol­low­ing three items:

1.Ad­di­tional fund­ing re­quired as­so­ci­ated with new fa­cil­ity is fore­casted to be be­tween $100,000 -$150,000 an­nu­ally, com­menc­ing in 2018. This is an op­er­at­ing im­pact, and will in­crease pres­sure on the prop­erty tax levy.

2.Un­known costs as­so­ci­ated with de­com­mis­sion­ing of the old pool are fore­casted to be $30,000. This is strictly a con­tin­gency amount based on hy­po­thet­i­cal sce­nar­ios that may or may not oc­cur when the wa­ter is drained from the old pool. It will only be uti­lized if re­quired, how­ever, for proper ac­count­ing pru­dency, must be iden­ti­fied and al­lo­cated in the bud­get. This is also an op­er­at­ing im­pact, and will in­crease pres­sure on the prop­erty tax levy.

3. Ad­di­tional fund­ing re­quired for the prin­ci­ple and in­ter­est pay­ments re­lated to the 30-year deben­ture of the fi­nal con­struc­tion line of credit. With the in­for­ma­tion avail­able to­day, in­clud­ing the two items iden­ti­fied above for the con­struc­tion of the fa­cil­ity, the bor­row­ing amount cur­rently stands at $12,400,000 which is es­ti­mated at to­day’s in­ter­est rates to be es­ti­mated around $680,130 in an­nual pay­ments com­menc­ing in 2019, and for 29 years there­after.

“This is an op­er­at­ing im­pact and will in­crease pres­sure on the prop­erty tax levy as of 2019.”

Av­goustis said th­ese three items will need to be in­cluded, and prop­erly cal­cu­lated as part of fu­ture year bud­get de­lib­er­a­tions but “have been iden­ti­fied here for trans­parency pur­poses.”

The CAO said a foren­sic au­dit is needed be­cause he “can­not ac­cu­rately pro­vide an­swers to cer­tain ques­tions at this time, and will be re­quired to de­fer in­ves­ti­gat­ing them to a pro­fes­sional au­dit.

“This re­quest will be made as part of the 2018 bud­get and will im­pact the prop­erty tax levyand if ap­proved will com­mence af­ter the project has been com­pleted.”

Av­goustis

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