Burlington’s city manager is proposing to retain outside consultants at a cost of $150,000 to conduct a review of the LaSalle Park marina proposed permanent wavebreak and expansion, including more cost effective alternatives.
The recommendation comes after a review by the city’s finance staff of the LaSalle Park Marina Association’s (LPMA) finances determined that the association could not afford the permanent wavebreak, including annual debt repayments, deposit on a joint venture loan, and reserves for replacement/repair of infrastructure. The project also represents a risk to Burlington taxpayers, according to a finance staff report.
The LPMA operates a portion of the marina for its members under a joint venture agreement with the city. The balance of the marina includes a public boat launch, the Burlington Sailing & Boating Club (BS&BC) – many of whom are also LPMA members – and the Burlington Able Sail program (sponsored by Rotary, LPMA and BS&BC, as well as eight other corporate sponsors, and individual donors).
The LPMA has been advocating for a permanent rock wave break and additional boat slips to protect damage to boats and docks from storms and wave action. Currently, the marina has a floating wave break.
The estimated $14m cost of the proposed permanent wavebreak is proposed to come from federal/provincial grants of $9.4 million, and a Joint Venture Loan from the city or through Infrastructure Ontario (IO) of $4.6 million.
Debt repayment on a $4.6 million loan over 25 years would cost $268,000 per year, plus $80,000 per year for wavebreak maintenance. An infrastructure reserve to replace the existing finger docks is estimated to be $128,000 annually. After accounting for revenues and expenses including the above, the marina would be in a deficit of $204k in Year 1, dropping to a deficit of $175k in Year 5 after wavebreak installation, according to the city finance staff report.
These figures don’t include the 10% downpayment required for a joint venture loan ($1.4 million), or $350,000 for detailed design. Currently, the LPMA has $356,000 in a wavebreak replacement fund, which would be depleted by the design costs. There is also $400,000 in a reserve fund restricted to reimbursing original boaters (charter members) who contributed to the initial construction of the marina on the condition they would be fully refunded their contribution when they sold their slip. The existing obligations on the fund outweigh the balance: In 2015, there were 117 Charter members entitled to a refund, for a potential demand on the reserve fund of $625,000, according to the city manager’s report (pg. 5).
There is no request for direct funding for the project from the city, but there are still financial implications for the city and for taxpayers, according to finance staff. Taxpayers have already contributed to the LPMA with $350,000 for the environment assessment of the wavebreak (2011) and $6,800 for the boating capacity study (2013).
Typically senior government funding is received when a project is substantially complete. That means the city would have to “cash flow” these grant funds in advance. Cashflowing $9.4 million even for a short time represents “a taxpayer contribution”, not least of which because of forgone interest on those amounts – roughly $140,000 – that would need to be “supplemented by the tax base,” state finance staff. (pg. 8).
Whether the loan is through IO or the city, “the city would be fully responsible for repayment of this debt if LPMA defaults,” notes the report (pg 7). The loan would also impact the city’s debt limit policy. Debt repayment is 10 years, not 25 years as requested.
Currently, the LPMA does not qualify for a Joint Venture loan from the city, given that less than 80% of members are from Burlington. An estimated 44% of slips are currently owned or rented at the marina by Burlington residents, according to the city’s manager’s report (pg. 4).
If the marina is expanded as part of the wavebreak proposal, 70% of slips would be available for rental, shifting the marina from a resident marina meeting community needs to a transient marina serving the broader interests of boaters in the GTHA. This represents a fundamental transition from a Joint Venture that serves members interests to a contracted service managing city assets used by the general public, states the city manager’s report, adding that the city’s procurement process would normally require a competitive process for contracting out this service.
Due to the financial and policy implications to the city, the city manager recommended the city take carriage of the proposed wavebreak project, assess its alignment with the Strategic Plan and priority for capital funding, and undertake a review of the city’s Joint Venture Policy, particularly related to capital projects. He also recommended that LPMA be compensated for costs incurred to date in leading the project.
The proposed consultant’s review will include a financial assessment and recommended strategy if the assessment indicates the marina isn’t viable without an expansion and permanent wavebreak. The consultants will also review alternative wave break options to determine if there is a more cost effective solution.
The recommendations were approved at committee and head to council Oct. 3.
Earlier this year, council voted 6-1 to authorize the mayor to send a letter of support for senior government grants for the LPMA wavebreak project. We have subsequently been asked by provincial and federal officials where this fits in our priority list, given competing requests from the city for grants. The letter has been put on hold. I did not support sending the letter until we had the detailed financial analysis which we now have showing the potential risks to the city.
I supported the review of the city’s Joint Venture Policy at committee, but not the outsourcing of the financial review and analysis for $150,000. My rationale is that it would simply reinforce what we know: the permanent wavebreak requires a public financial contribution and isn’t a priority identified in our strategic plan.
However, I am considering changing my vote at council given the need to assess the viability of the marina and explore more cost-effective wavebreak opportunities. Residents have been asking council to take a position on the wavebreak one way or the other for some time, which should have happened before the project was this far along. We now have that opportunity, with the consultant’s review to inform whatever position we take.
I don’t support compensating the LPMA for costs. Taxpayers have already contributed over $350,000, and depending on the vote at council, will contribute another $150,000 for the independent review. Also, compensation would violate our existing Joint Venture Policy requirements for 100% self-funding of capital infrastructure and renewal, particularly for membership-based facilities (pg 9-10 of the Joint Venture policy).
Earlier this year, council voted 6-1 to authorize the mayor to send a letter of support for senior government grants for the LPMA wavebreak project. I did not support sending the letter until we had the detailed financial analysis showing potential risks to the city. We now know there are substantial financial risks to the city.
We have also been asked by provincial and federal officials where this fits in our priority list, given competing requests from the city for grants.
I’m pleased the letter was not sent and has been put on hold pending further review of this project.