Tewin Would Cost $618 Million For City Services

12/07/2023

This is a release from the City of Ottawa:

The purpose of the memorandum is to provide an update on the financial implications in the Infrastructure Master Plan (IMP) and next steps. The IMP, initially scheduled for a Special Joint Planning and Housing and Environment and Climate Change Committee meeting November 23 was postponed. This postponement resulted from the Province’s announcement of the intent to introduce Bill 150, the Official Plan Adjustments Act, 2023.

Background

The City’s Official Plan establishes the City’s goals, objectives and policies to guide growth and manage physical change to the year 2046, when the population is projected to rise to 1.4 million.

The Infrastructure Master Plan sets growth-related projects, policies, objectives, and priorities for municipal water, wastewater, and stormwater management infrastructure, supporting the City’s New Official Plan. The IMP identifies major capital projects needed to meet growth needs to 2046.

Additionally, the IMP includes project funding and financing and identifies the percentage of project costs attributable to development charges and to City rate budgets. It also determines the approximate timing of expenditures based on the IMP’s priorities, objectives and growth patterns.

Given the recent introduction of Bill 150, the Official Plan Adjustments Act, 2023, and postponement of the Special Joint Planning and Housing and Environment and Climate Change Committee, circulating this memo ensures Council has up to date IMP financial information in their ongoing decision making and dialogue. The memo details the present state, acknowledging existing pressures and noting that the provincial proposal to remove expansion lands may impact capital costs outlined in the IMP for the period 2026-2046 but are yet to be determined.

Financial implications

The total estimated cost of the growth-related upgrades in the IMP related to water and water services is $1.4 billion for the period 2023-2046 (excluding Tewin). This includes:

• 26 proposed water distribution projects estimated to cost approximately $901 million; • 37 wastewater collection projects estimated to cost approximately $742 million; and

• Growth-related projects at ROPEC and at the Lemieux water purification plant are expected to cost approximately $376 million.

The $1.4 billion includes approximately $1.2 billion of development charfes and about $200 million in costs beneficial to the existing community.

Finance staff assessed the affordability of the IMP both from a ratepayer and development charge perspective. While projects needed to support new growth are funded from development charges, in some projects, there is a benefit provided to the existing community. Preliminary results indicate that the current level of funding from rate-supported budgets and development charge revenue are insufficient to cover all of the IMP’s capital costs.

Benefit to Existing (BTE) Ratepayers

Revenues related to the renewal of infrastructure assets and the share of growth costs that benefit existing ratepayers (BTE portion) are currently increased annually in line with the 2017 Long Range Financial Plan (LRFP) (ACS2017- CSD-FIN-0023). From a ratepayer perspective, to pay for the BTE portion, it is estimated that water/wastewater revenues would need to increase by an estimated $16 million annually (seven per cent) from the forecasted level of investment approved in the LRFP. The current funding plan cannot support the updated BTE portion of the IMP in addition to the targets previously set. Consequently, the IMP would necessitate rate increases beyond initial projections.

Development Charges

Development charges (DCs) also need to keep pace with growth needs to help keep the City affordable. While existing DCs in Ottawa are among the lowest in Ontario compared to other municipalities, the principle tenet of the DCs is to ensure growth needs are paid for by new growth, not by existing ratepayers. The current level of development charge collections, taking into consideration the mandatory transition impacts from Bill 23, cannot support the IMP’s growth related capital costs (excluding Tewin) that total $1.2 billion, in particular for water services. The total impact of mandatory discounting for water and wastewater development charges until 2046 is $54 million and $61 million, respectively. Financial funding options to improve affordability could include a combination of increasing water services development charge revenue, issuing debt, or deferring projects. The degree to which these funding levers would be applied, could potentially be reduced by funding from other levels of government. Consultation with the development industry during consideration of the IMP and the upcoming DC By-law update is critical to ensure that Ottawa remains a competitive place for housing development.

Democracy Don’t Come Easy: WHOPPER WATCH

Tewin

The cost to service the Tewin Community is approximately $618 million: $396 million for water and $222 million for wastewater and in accordance with Council direction needs to be funded by the development. These costs include costs related to oversizing Tewin’s infrastructure which will benefit growth areas outside of Tewin’s development, the magnitude of which has prompted further discussions about how and who will finance these project costs because the cost is incurred in advance of development.

For the $618 million to service Tewin, staff continue to work under the direction that Tewin will pay for Tewin, putting no additional burden on City finances. A total of $167 million of Tewin’s water and sewer costs are required to accommodate potential growth needs beyond the 2046 planning period. Although this oversizing of the water and wastewater infrastructure is cost effective over the long term the cost must be financed in the near term. Annex 12 of the Official Plan indicates that oversizing costs associated with Tewin infrastructure are to be front-ended and covered by Tewin. However, given the size of these costs, size of the area for future potential growth that currently does not have an urban designation status in the Official Plan and multiple landowners that could potentially benefit from the provision of oversizing, discussions about how these costs will be financed remain on-going.

Next Steps

The IMP is anticipated to be presented for Council’s consideration in 2024. Discussions with Tewin are also ongoing to determine how best to finance oversizing costs associated with Tewin infrastructure. Future Development Charges By-Law will rely on the information and recommendations provided in the IMP, ensuring that water, wastewater, and stormwater management infrastructure needs, and funding strategies are aligned with the City’s growth goals and policies.

An update to the Rate Long Range Financial Plan, expected in Q2 2025, will guide the overall rate revenue requirement, incorporating the pressures identified in the IMP and the Asset Management Plans to be completed, which will also identify capital asset renewal requirements and operating costs.

Additionally, staff continue to focus efforts on maximizing funding opportunities from various levels of government. This includes submitting future applications to the newly announced Building Faster Fund and Housing-Enabling Water Systems Fund aimed at supporting critical water infrastructure projects that enable housing development.

Staff are analyzing the impacts of removing the Provincially added urban expansion lands and plan for the impacts of legislative changes and the effects on the IMP. City staff will continue to identify key initiatives, projects, and costs essential for meeting the City’s growth needs and the goals of our provincial and federal partners. Collaborative efforts are critical to fostering a sustainable city for all residents.

If you have any questions, please reach out to Susan Johns, Director Asset Management, at Susan.johns@ottawa.ca or Isabelle Jasmin, Deputy City Treasurer, Corporate Finance at Isabelle.jasmin@ottawa.ca . We would be pleased to schedule a briefing with you.

Sincerely,

Tammy A. M. Rose, P.Eng General Manager

Infrastructure and Water Services

—