Questions and answers: Urbacon

What are the costs of the legal action?

Full settlement costs, including all applicable taxes, are $5,800,837. Full legal costs, including lawyer’s fees, mediation, expert witness fees and reports, are $2,300,484. Together, settlement and legal costs amount to $8,101,321.

How did the City pay for the settlement and legal costs?

There were sufficient funds in City reserves to fund the settlement. Settlement and legal fees have been paid as per the following breakdown, approved by Council:

  • $1,693,100 from the Legal/OMB reserve;
  • $1,500,000 from the Capital Tax Reserve Fund; and
  • $5,243,287 from the Capital Asset Renewal Reserve Fund.

City staff will present a number of options for repayment of its Capital Asset Renewal Reserve Fund (from where the bulk of the settlement has been drawn) to Council in July 2015.

Are property taxes impacted by this settlement?

As part of the 2015 budget, Council approved the allocation of $500,000 to the replenishment of the Capital Asset Renewal Reserve. While the cost of the settlement is being accommodated within the City’s capital financing guideline, and while there was sufficient reserves to fund the settlement, repayment of those reserves does create an impact.

The current policy stipulates the Capital Asset Renewal Reserve Fund be repaid. Council can however decide to amend that policy and do otherwise. City staff will soon bring forward various options and a recommendation to Council on replenishment of those reserves.

How does this affect the City’s capital program?

There were sufficient funds in City reserves to fund the settlement, and the repayment of those reserves can be accommodated within the City’s capital financing guideline.

In any given year, no more than 20% of the previous year’s tax levy can be transferred to fund capital reserves and debt service costs (principle and interest) which will, in turn, be used to fund capital projects. The repayment Council approved in 2015 ($500,000) has been accommodated within the guideline. There are no capital projects that couldn’t be accommodated because of the repayment.

However, replenishing our Capital Asset Renewal Reserve Fund can affect the pace at which we complete some capital projects, because we’re repaying the reserve instead of building it.

How will this affect the City’s credit rating?

The Urbacon settlement itself does not affect the City’s latest AA+ credit rating. That credit rating already included consideration for a potential payment amount, which the City reported to Standard and Poor’s.

City staff is now working with the City’s rating agency to understand the impact should Council decide to extend the repayment period or not replenish the Capital Asset Renewal Reserve Fund. A city’s credit rating is based on a number of factors, not merely its reserve balances. (Rating agencies take a much more comprehensive view than reserve balances alone; the City would have to wait for S&P’s analysis to understand what contributed to a change in rate, should one occur.)

Are there other outstanding litigations connected to this one?

No. The recent settlement of the final two actions associated with the Urbacon litigation brings the entire litigation and associated actions to a complete and final conclusion.

The final two actions—one with Aviva Insurance Company of Canada, the project insurer; the other with architects Moriyama & Teshima Architects (MTA)—specify the City pay $100,000 to Aviva, and MTA pay $150,000 to the City of Guelph, offsetting the overall cost of the settlement by $50,000 for a total of $5,800,837.

Will the City do things differently moving forward?

The City’s administration took it upon itself to conduct a review of how the City handles complex capital projects. The CAO will present the findings of that review to Council in August.

There are many things we’ve learned from this large capital project and from the litigation that ensued. This experience has made the City better able to manage complex capital projects effectively moving forward.

Will the City release a full accounting for the costs of new City Hall and POA?

Yes. A full accounting analysis has been underway. Furthermore, senior administration is engaging a third party auditor to undertake a full capital cost audit of the project. Findings from that process will be shared when the audit is complete.

In the meantime, click here for final settlement and legal costs.