2024-2027 Multi-Year Budget: capital budget

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Capital Program Resourcing Strategy

The Capital Program Resourcing Strategy was approved in 2021 to address the needed people resources to execute the expanding capital program. The four-year budget is larger than historical budgets and the people resources funded through this strategy are critical to achieving it. Staff have revised the original forecasted ask for years three through five of this five-year plan through budget request 000991 to align the people resources to the capital program presented in the budget and forecast. Council subsequently approved a phase in approach for these staffing positions funded fifty per cent in year one and the remaining fifty per cent in the following year.

2024-2033 Key capital project themes

State of good repair

State of good repair of our assets continues to drive the capital program with 47.2 per cent of the budget focused on infrastructure renewal over the four-year period and 61.9 per cent over the 10-year forecast. Condition assessments through the Asset Management Plan as well as requirements under legislation such as the Safe Drinking Water Act determine what work is required and when to maintain appropriate levels of service.

Project highlights:

A large portion of infrastructure renewal work is linear infrastructure work. This includes full road reconstructions with underground infrastructure as well as road restoration and repaving and linear water distribution, sanitary sewer collection and stormwater drainage piping and infrastructure. Over the 10-year period this is an investment of over $803.5 million ($153.9 million 2024-2027 and $649.6 million 2028-2033) and includes major projects such as the following:

• Exhibition Area Reconstruction (PN0082-PN0087) – broken out into six phases over the 10-year forecast ($60.9 million)
• Trunk Sewer Improvements
  • Phase 1 – Water Resource Recovery Centre to East of Hanlon (SC0077 $14.5 million)
  • Phase 2 – Wellington – Waterloo to Edinburgh (PN0107 $31.2 million)
• · Road Restoration and Resurfacing Program – annual program totaling $54 million of the 10-year forecast (RD0403)

Repair and replacement of bridges and structures as recommended through the bi-annual Ontario Structure Inspection Manual (OSIM) inspection report totals $36.4 million 2024-2027 and $38.0 million 2028-2033. This includes $25 million for the modification of Macdonell Street Bridge Area including Allan’s Dam and Bridge (RB0013) and $6.8 million for replacement of the structure on Edinburgh Road (BR0001).

Technology initiatives including the lifecycle replacement of software and hardware to meet best practices, avoid interruptions to services and to leverage technology for efficiencies and transparency totals to $20.3 million 2024-2027 and $20.2 million 2028-2033.

To maintain Guelph Transit’s current service levels, the 10-year budget includes the replacement of seven end-of-life transit buses per year (TC0070 and TC0077 with a total of $105.6 million over the 10-year forecast). Current diesel buses are planned to be replaced with electric zero emissions buses. The City has leveraged funds through the Investing in Canada Infrastructure Program (ICIP) and Provincial Dedicated Gas Tax to offset some of the tax-based funding of this program.

Replacement of essential vehicles and equipment/technology including Next Generation 911 as well as the renewal of facilities for emergency services of $33.8 million over the four-year period. Fire ($10.8 million – includes replacement of pumper FS00089), Paramedics ($5.8 million) and Police ($17.2 million).

Unlocking more housing

Unlocking more housing means ensuring city infrastructure is in place so that development can move forward in the near term in areas of the city that are targeted for growth through the Official Plan such as downtown and the Guelph Innovation District (GID). This includes providing the necessary water and wastewater service capacity and associated linear transportation network to support movement of these vital services. This does not include local infrastructure that would be handled through subdivision agreements, nor city services to provide levels of service to match existing built areas such as waste removal, parks and recreation, emergency services, all of which would be needed to be put in place after development. The province has mandated that the city grow, and the City planned extensively for this growth out to 2051 through an update of the Official Plan and many supporting service master plans. Due to the significant housing supply shortage in affordable housing units across Ontario, in late 2022, the Province requested that Guelph (as well as most other medium to large cities) sign a housing pledge accelerating the number of housing units the City will plan to reach by 2031. This has increased the City’s 10-year growth target by an additional 6,100 housing units to a total of 18,000 by 2031, which is beyond what was planned and anticipated through the Council-approved Official Plan. It is not expected that this acceleration will mean significant rework on the servicing master plans, however, in some cases, it will mean project-specific changes like accelerated timelines and/or upsizing of infrastructure to accommodate growth more quickly.

More notably, the Province has amended the City’s Official Plan to allow more density in certain areas that was not included in the servicing plans and this may give cause for more upsizing of infrastructure than originally required. During the process of finalizing this budget, on October 23, 2023, the province has now announced that they are reconsidering their amendments to Guelph’s Official Plan, creating additional delays and uncertainty in capital planning.

In addition, the City is currently reviewing allowing four housing units per property as-a-right across the City, up from the current three already approved (but under appeal at the time of this Budget). Due these constantly changing variables, it is expected that the capital projects included in the budget and forecast period will continue to be revised as staff are working to prioritize the infrastructure that will result in the most housing for the community. Future updates of the City’s service master plans will also determine what additional projects or enhancements to our current projects need to be considered to support those additional units.

Project highlights:

• York Road Reconstruction – Victoria Road South to Watson Parkway (PN0110 $30 million) – this project includes constructing a distribution watermain to the Clythe Water Treatment Plant which will provide water capacity for GID. It will also include replacing aging infrastructure which is at its end of useful life and reconstructing the existing road and creating a multi-use path to support multimodal transportation. Original plans to widen the road have been revised due to the significant cost to accommodate additional vehicle lanes, including land acquisition, creek realignment, and hydro relocation.
• Clythe Treatment Plant (WT0060 $29.2 million) – this project involves bringing the existing Clythe well back online with treatment, replacing the booster station and providing additional water storage in the northeast quadrant which includes GID. ·
• Water Resource Recovery Centre (WRRC) plant expansions – includes the expansion of Plant #2 (ST0004 $14 million), Preliminary Treatment (ST0038 $8.6 million) and Tertiary Treatment Process (ST0043 $51.1 million) to increase the rated capacity of the WRRC as the current capacity of the WRRC is projected to be exceeded by 2027 with anticipated population growth and effects of climate change.
• Downtown Revitalization Program (multiple projects $200.3 million) – This program includes the full corridor reconstruction for replacement of aging infrastructure (water, wastewater, stormwater and roads) which will also support densification in the downtown area. The program is supported by a mix of development charges, tax and rate reserve funds and funds from Canada Community-Building Fund. Due to affordability constraints, the streetscaping components of these projects have been budgeted at “good” and not “best” and will continue to be further refined in the design phases of this program.

Facilities – replacement, growth and service enhancements

The 10-year capital budget has a large amount of facility work due to aging buildings, Council objectives (e.g. electrifying the bus fleet), legislative changes (e.g. recycling blue box transition), expansion to unlock growth (e.g. increasing water and wastewater capacity) and supporting past and future growth to meet our housing target. Table 23 outlines the major facility projects that are within the 10-year budget. These projects are creating significant financial challenges within the capital plan and will be an on-going focus of staff through the budget confirmation period to refine the scope and timing of these projects to reduce and defer cost. As noted in the Debt strategy, the City’s available debt capacity has been allocated to a number of these projects in the 2024-2027 budget.

Operating impacts from the capital budget (2024-2027)

The 2024-2027 operating budget impact from proposed capital projects totals $14.6 million, which is included in the budget year in which the operating impact will begin. These project decisions are described in Table 24 below by program of work.

Special funding sources

The capital budget is primarily funded from property tax, utility rates and development charges, however, there are additional special funding sources in the form of permanent government grants, one-time grants and special own-sourced revenue that help offset those main sources.

The Canada Community-Building Fund (CCBF) (previously Federal Gas Tax) is a permanent, sustainable, funding source from the Federal Government and is allocated to municipalities on a per-capita basis and indexed two per cent annually. These funds are maintained within an obligatory reserve fund and managed across a long-term period to be allocated strategically to capital projects within the budget and forecast. Council has directed that these funds be used to support and off-set infrastructure renewal funding, in the 10-year period $98.9 million is funded from CCBF. Staff has directed $64.6 million of CCBF over the 10-year period to replace the infrastructure renewal portion of projects in the Downtown Infrastructure Revitalization program. In addition, $33.1 million of the replacement and renewal of bridges and structures is funded from CCBF.

The Province supports local transit through the dedicated gas tax program whereby funds collected through gasoline sales in the province are distributed to municipalities that support public transit services. This is a sustainable funding source with annual transfers based on ridership. In the 10-year budget $32.8 million has been allocated to a portion of the bus replacement projects (TC0070 and TC0077).

The Efficiency, Innovation and Opportunity Fund (EIO) was established in 2017 to provide for corporate investment opportunities that generate efficiencies and/or savings or avoided costs. Funding of this reserve fund is from cost savings created through the investments as well as special contributions such as the one-time special Guelph Municipal Holdings, Inc. dividend from the merger with Alectra Inc., or other Council approved directions. In the 10-year period $4.1 million from the EIO reserve fund are allocated to upgrades of the development permitting software (IT0057 Amanda Upgrades $800 thousand) as well as other digital enhancements (IT0074 $3.3 million).

The Transportation reserve fund was created through the Transportation Master Plan (TMP) report in 2022 to support the implementation of the TMP initiatives in support of Vision Zero and is funded from the net revenues of fines collected through red light cameras and automated traffic enforcement programs. Through the 10-year budget $2.4 million in projected revenues are allocated to fund new pedestrian crossovers (TF0033) and other road safety initiatives (TF0034).

The City actively applies to one-time grants wherever they are available. The current capital budget includes approved grant funding from the Investing in Canada Infrastructure Program” (ICIP) under the Public Transit stream. Furthermore, the capital budget is revised in-year as additional grants are approved and additions are reported through the quarterly budget monitoring report. The City currently has additional projects under consideration for ICIP funding as well as an additional provincial grant for implementing Next Generation 911 and submissions for many other capital projects awaiting approval.

Unfunded planned capital investment

The plan for this multi-year budget and forecast was to include all the new projects coming out of the recently updated secondary plan, service master plans, strategies, action plans, and the updated Development Charge Background Study (based on the Official Plan population and job targets). Also planned for inclusion in this budget are the projects that were deferred from 2022 and 2023 totaling $85.3 million as part of the Inflationary Financial Impact Strategy exercise to manage higher than average inflation. Due to those deferrals, the projects have been budgeted at a higher cost to account for inflation. Lastly, as a City, we have continued to mature our asset management data and budgeting tools that also feed into the budget as the aging infrastructure is addressed.

After the initial budget development was completed, it was clear that the City didn’t have the financial capacity to complete all this work in the timing previously identified. Staff then made several rounds of budget deferrals using a risk-based approach. This resulted in deferrals of over $693.7 million from the four-year capital budget, further details can be found in Attachment 2 in Guelph’s 2024-2027 Multi-Year Budget. Even after all this work, there remains isolated financial deficits in certain reserve funds that need to be addressed prior to the 2025 budget confirmation. Specifically, the affordability of the water and wastewater capital program, the City’s infrastructure renewal program and the facility needed to support transit electrification. Staff are engaged in a number of efforts to address these concerns including design and rescoping work as well as further life-cycle extension and prioritization of aged asset investment.

Beyond 2027, the current planned funding levels are not sufficient to fund the current capital forecast and more projects will be deferred beyond 2033.

Also not to be lost in what comes ahead are the softening economic conditions as borrowing rates are expected to remain high during 2024. These conditions may mean the capital development fee revenue, as budgeted, may be at risk in the early years of the budget and will need to be monitored very closely. Conversely, lower than expected development activity will also mean lower than projected exemptions, discounts, and phase-in costs for development charges resulting from Bill 23.

By presenting the capital budget and forecast in its current state with funding shortfalls, staff are able to demonstrate the projected deficits and the need for further reductions. This budget presentation enables good, constructive conversations with Council and staff to start in 2024 and work together to refine expectations and priorities as we build community. More information on reserve funds can be found here.

As part of the $693.7 million that was deferred/removed out of the 2024-2027 capital budget, staff have presented a group of these projects totaling $63.6 million as “contingent on funding”. This was done to reduce the budget but to also keep track of these projects so that if funding does become available through grants, front-ending agreements or partnership opportunities, they may come back to Council for approval to move forward. In the four-year budget, the majority of these projects are related to Clair Maltby Secondary Plan ($44.2 million four-year total). The remainder of the projects categorized in Table 25 represent service enhancements and were not included in the budget due to the lack of available service enhancement reserve funds under the current strategy.