City council has approved drawing from reserves to cover rising costs of the ‘Midtown Gateway’ road realignment and the mid-town water supply projects.
More than $4.8 million in budget increases for the projects were approved at a council meeting Monday, July 4.
The Midtown Gateway project, formerly known as the Boxwood connector, is a road designed to divert traffic away from the Bowen and Northfield roads intersection.
The mid-town water supply project is a major water infrastructure upgrade involving the construction of two water pipes in the area to replace aging and undersized infrastructure that delivers drinking water to Nanaimo’s central and north areas.
The water supply project is one of a number of major projects that are coming in significantly over their budget estimates because of construction market volatility, labour shortages and ongoing supply chain disruptions, according to city staff.
Staff recommended council approve an additional $72,500 for the storm sewer section of the Midtown Gateway and raise the budget for the water distribution portion of the project by $586,000. The money will be taken from the city’s drainage DCC reserve fund and the water reserve fund.
Staff also recommended more than $4.2 million be added in 2022 to the mid-town water supply project budget. That money will be drawn from the water supply DCC reserve fund, the water asset management reserve fund and the water reserve fund.
Drawing from reserves would avoid increasing taxes to pay for the projects, said Bill Sims, the city’s general manager of engineering and public works.
“This is really another incident of a volatile construction market and economic uncertainty,” Sims said.
He said a contractor was brought in early in the tendering process for the two projects to save costs and optimize infrastructure designs.
“The silver lining, perhaps, is that this provides cost certainty for the entirety of all of the water supply projects,” Sims said. “So we’ll have our … international pipe supply secured. We’ll have our contractor secured … Approving this staff recommendation will enable the city to award this project and lock in that certainty.”
The first phase of the projects included ground preparation of the area where the road and water supply lines will run. A wetland has also been restored in the area, which had been impacted by mining and other industrial operations. The wetland will also become part of the storm water runoff dispersion system.
Coun. Erin Hemmens asked if there are other city project now at risk and, if so, which ones.
“I’m curious. This is a $4-million overage … I’m hearing that it’s not impacting taxes, which is great, but what projects are we now worried about down the line? Or are we?” Hemmens asked.
Mike Squire, city manager of water resources, said some projects have been put off, but staff is looking at the city’s core infrastructure and the water supply project has been a priority since a water main failed under Bowen Road in 2020.
“This was an accelerated project. It was landed in our laps. Normally we have the luxury of five years to plan and budget for something like this, but due to the current risk this is priority No. 1, the first phase of this project,” Squire said.
Council voted unanimously to approve the additional funding from reserves.