RECOMMENDATIONS:

THAT the report “Markham Village Library Expansion Funding and Analysis” be received;

AND THAT Council approve the design of Option 1 as recommended in the “Markham Village Library Expansion” report presented at the Committee of the Whole on March 9, 2004;

AND THAT Council approve the renovation of the existing Library to be undertaken at the same time as the new construction, at an estimated cost of $2,266,000 (inclusive of 3% GST), to be funded from the proposed GST rebate of approximately $1,150,000 and the remaining funding to be determined by the Budget Sub-Committee through the review of the 2004 Budget;

AND FURTHER THAT the funding analysis on the Recreation and Culture, Library and Fire Construction Program be received for information purposes;

PURPOSE:

The purpose of this report is to identify the funding sources for Option 1 and 3 as presented to the Committee of the Whole on March 9, 2004, and to address the importance of considering and prioritizing the Recreation and Culture, Library and Fire Construction Programs that will be competing for the limited development charge, non-development charge, and operating budget dollars.

BACKGROUND:

At Committee of the Whole on March 9, 2004, Council was presented with three options for the Markham Village Library Expansion. The recommendation of Council was “that consideration of the matter be referred to the March 22, 2004 Finance and Administrative Committee meeting for consideration; and that, at that time, staff report on detailed funding alternatives including alternatives to support Option 3 - expansion to the north with a link to the arena.”

FINANCIAL CONSIDERATIONS:

The Town of Markham has been in construction mode since 2002 and will continue to be for the next several years. There are limited funding sources available, both development charge and non-development charge and the majority of the projects have an operating impact. Option 3 of the Markham Village Library Expansion should not be considered in isolation of the competing requests that exist.

As the projects identified below proceed, Council will be presented with many recommendations and options for consideration. The challenge to Council in receiving these requests independently, is weighing the benefit versus the impact that each request may have on future projects. It is imperative that Council prioritizes the construction program, and consider each project with an awareness of the other competing priorities that exist.

There are two main sources from which to fund the non-development charge component of these projects: the tax base and reserves. For example, the Hydro reserve may be the solution for capital projects that require tax funding however staff recommend that the use of Hydro reserves be deferred until the results of the Reserve Study currently underway and the associated proposed policies for the use of reserves have been provided to Council. The operating and capital budgets are both constrained by the capacity to increase property taxes.

The Town of Markham currently has four projects either under construction or approved in the capital budget:

· Angus Glen Community Centre and Library;

· Thornhill Community Centre Expansion Phase 1;

· George Pingle House Renovation and Expansion;

· Markham Museum Reception Centre;

In addition to the Markham Village Library Expansion, Council will be facing decisions on the following construction projects in 2004:

Centennial Community Centre Expansion
Centennial Community Centre Indoor Bocce Court
Bur Oak Fire Station

Projects submitted for consideration in the 2004 capital budget that are currently below the line, will also require a decision from Council. The two major projects are the Centennial Community Centre Renovations, and the land acquisition for the proposed Community Centre at Hwy 48 and 14^th Avenue.

Beyond 2004, there are numerous capital projects under consideration. Staff have identified that the implementation of a parking authority will be critical to the success of Markham Centre. The Hydro reserve has been identified as a potential funding source for the parking structures. Other projects include the impact of the Museum Master Plan, the Theatre Expansion, an Outdoor Artificial Rink and a Living Arts Centre. In addition to these, the capital forecast includes the construction, expansion or renovation of eight Recreation facilities, four Libraries and three Fire Stations.

Each of these projects will be competing for both Capital and Operating budget dollars. It is estimated that 588,000 square feet will be constructed over the next several years. The chart below identifies a potential cost of approximately $159 million, split between development charges ($129 million) and non-development charge ($30 million) funding sources. This estimate includes only the cost of construction, and provides no assumptions for the acquisition of land, furniture and equipment, or library collections. In addition, these projects will have an impact to the operating budget of approximately $12 million.

In principle, Fire Stations are funded 100% from development charges, and the Recreation and Library Facilities are funded 90% from development charges and 10% from non-development charge sources. However, as indicated earlier the development charge funding is limited. For example, in previous reports to Council and during the 2003 budget discussions, it was identified that approximately $5.M in the Library expansion program will have to be funded from non-tax sources (see East Markham Library). The Town of Markham’s current Development Charge by-laws are under review and the capital program identified below may exceed the square footage allocated from development charges.

The following chart illustrates the potential funding impact based on the anticipated construction program:

			Funding Sources
Project	Est. Sq. Ft	Total Cost (2)	DC	Non DC	Net Operating Budget
		$000's	$ 000's	$ 000's	$ 000's
Recreation Facilities:
Centennial CC Renovation		2,040		2,040
Milliken Mills CC Expansion	14,000	3,178	2,860	318	100
Rouge River CC Renovations		570	513	57
YMCA	20,000	2,700	2,430	270
Hwy. 48/14th Ave CC	145,000	33,930	30,537	3,393	1,030
East Community Centre	150,900	35,310	31,780	3,530	1,070
East Olympic Pool	80,000	28,000	25,200	2,800	600
Indoor Soccer Field & Gym	61,800	15,326	13,793	1,533	450
Library Facilities:
Markham Village Library Renovation		2,266		2,266
Milliken Mills Library Expansion	6,300	1,430	1,287	143	300
East Markham Library	20,000	4,680		4,680	950
Markham Centre Library	60,000	15,300	13,770	1,530	2870
Fire Stations:
New Fire Station - Cornell	10,000	2,270	2,270		1,500
New Fire Station - Cathedral	10,000	2,340	2,340		1,500
New Fire Station - Markham Centre	10,000	2,410	2,410		1,500
Other:
Theatre Expansion		7,100		7,100	60
Museum Master Plan Implementation (1)		TBD			TBD
Outdoor Artificial Rink (1)		TBD			TBD
Markham Centre (1)		TBD
Living Arts Centre (1)		TBD			TBD
Parking Authority (1)		TBD			TBD
	588,000	158,850	129,190	29,660	11,930

Notes:

(1) These projects have not been included in the assumption as no information is available to accurately quantify the cost of these programs

(2) The total cost was calculated based on the approximate current cost per square foot in 2003 dollars ($220) indexed at 3% per annum based on the year in which construction is anticipated

(3) The cost per square foot from the 2003 operating budget was used in determining the operating impact. No assumptions for inflation have been considered.

The information above is intended to highlight the amount of construction that is anticipated to be undertaken over the next several years. Council must prioritize the construction program, and consider each project with an acknowledgement of the other competing priorities that exist.

In addition, the capital program may exceed the square footage allocated from Development Charges, and non-development charge sources will be required to fund these projects. In view of the large number of projects that do not have tax funding it is not recommended that any further projects be added to the capital budget.

The information below illustrates the preliminary project cost estimates for the Markham Village Library Expansion and identifies the funding sources available for each option.

OPTION 1—PRELIMINARY PROJECT COST ESTIMATE

Option 1 provides a two-storey addition with half basement to the south of the Existing Library. In order to analyze each element of Option 1, the following chart illustrates the elements/components of Option 1 as a construction project:

	Element Description	Preliminary Cost Estimate
1	New Construction (the two upper levels of the addition plus the shell of the half-basement) and Site Work	$3,821,300
2	Finishing the half-basement level of the addition to be occupied by the Library’s ATS	$530,450
3	Renovation of the existing building’s 3 levels	$2,266,000
	TOTAL	$6,617,750

FUNDING SOURCES:


	Preliminary Cost	Funding Sources
Description	Estimate	DC	Reserve	Other
New Construction (incl. Site Work)	$3,821,300	$3,439,170	$382,130
Finishing for Library ATS	$530,450			$530,450
Renovation of Existing building	$2,266,000			$2,266,000
Total	$6,617,750	$3,439,170	$382,130	$2,796,450

The New Construction of the Library would be funded 90% from Development Charges ($3,439,170) and the remaining 10% ($382,130) funded from a Reserve previously established to fund the mandatory 10% non-development Charge component of construction projects.

The finishing of the basement for the Library ATS ($530,450) would be funded from the elimination of the annual operating lease, until fully offset.

The renovation of the existing building ($2,266,000) would be funded from the proposed GST rebate of approximately $1,150,000 and the remainder to be determined through the review of the 2004 budget by the Budget Sub-Committee.

OPTION 3—PRELIMINARY PROJECT COST ESTIMATE

Option 3 provides a two-storey addition on a slab-on-grade foundation, to the north of the Existing Library. It requires the construction of new public meeting rooms to replace the current public meeting rooms displaced by ATS moving into the existing basement. A north-south internal street links the Existing Arena and the new Library addition. In order to analyze each element of Option 3, the following chart illustrates the elements/components of Option 3 as a construction project:

	Element Description	Preliminary Cost Estimate
	BASE BUILDING & SITE WORK
1	10,500 sq. ft. of new public library space as per the original projection	$3,115,750
2	5,250 sq. ft. of new ground floor public meeting/program rooms required to replace the existing program rooms	$1,236,000
	RENOVATION OF EXISTING BUILDING	$2,266,000
3	Renovation of the existing building’s 3 levels	$2,266,000
	LINK TO ARENA	$2,884,000
4	Link to the Arena, including alterations to the Arena and relocated services	$2,884,000
	TOTAL	$9,501,750

The preliminary cost estimate for Element 4 ($2,884,000) contains the following items:

· New Link to Arena (Interior Street)	$2,111,500
· Alterations to Existing Arena	$515,000
· Relocation of Ice Making Equipment and New Façade to Transformer Vault	$257,500
	$2,884,000

FUNDING SOURCES:

	Preliminary Cost	Funding Sources
Description	Estimate	DC	Reserve	Other
New Construction (incl. Site work)	$4,351,750	$2,804,175	$311,575	$1,236,000
Renovation of Existing building	$2,266,000			$2,266,000
Link to Arena	$2,884,000	$2,595,600	$288,400
	$9,501,750	$5,399,775	$599,975	$3,502,000

The New Construction of the Library in Option 3 would be funded as follows:

10,500 sq.ft (Element 1) would be funded 90% from Development Charges ($2,804,175) and the remaining 10% ($311,575) funded from a Reserve previously established to fund the non-development Charge component of construction projects.
5,250 sq. ft (Element 2) ($1,236,000) would be funded from the elimination of the annual operating lease ($530,450) with the remainder funded from the tax base ($705,550)

The renovation of the existing building ($2,266,000) would be funded from the proposed GST rebate of approximately $1,150,000 with the remainder to be determined through the review of the 2004 budget by the Budget Sub-Committee.

The 1999 Development Charge Background Study identified 351,300 sq. ft for the construction/expansion of recreation facilities over a ten-year period as noted in the chart below. Several of the facilities have been built, or have been identified to be built, larger than what was estimated in the Background study. As a result, the additional square footage must be substituted from another Recreation project. Currently, 129,070 sq. ft remains to be funded from Development Charges, which is less than the square footage anticipated for the construction of the East Community Centre. Therefore, it is not recommended that recreation square footage be used to accommodate the link to the arena. The following chart illustrates the Recreation facilities construction program:

	Forecast in 1999 DC Background Study		Actual Construction	Impact Incr/(Decr)
	Year	Sq Ft.	Sq Ft.	Sq Ft.
Angus Glen CC	2001	121,000	141,000	20,000	(a)
Thornhill CC Expansion	2002	20,000	27,000	7,000	(c)
Centennial CC Expansion	2003	25,300	23,185	(2,115)	(c)
Centennial CC Indoor Bocce Court			11,045	11,045	(c)
Mt Joy/Greensborough	2004	20,000		(20,000)	(a)
Milliken Mills Expansion	2005	14,000		(14,000)	(c)
Berczy (substituted for YMCA)	2006	20,000	20,000	0	(b)
East CC	2007	131,000	0	(131,000)	(c)

Total Sq Ft For Recreation Facilities		351,300	222,230	129,070

Notes:

(a) The additional 20,000 square feet constructed at Angus Glen Community Centre was substituted for the Mt Joy/Greensborough Community Centre

(b) The YMCA was allocated 20,000 square feet as a substitution for the Berczy Community Centre

(c) The additional 7,000 square feet at Thornhill Community Centre and 8,930 square feet at Centennial Community Centre (11,045-2,115) are a substitution from the Milliken Mills Community Centre Expansion and/or the East Community Centre

The 7,000 sq. ft link to the arena at Markham Village Library would require a substitution in square footage from the Milliken Mills library expansion and/or the Central East Library as noted in the chart below. The funding of the link would be 90% from Development Charges ($2,595,600) and the remaining 10% ($288,400) would be funded from a Reserve that was previously established to fund the mandatory 10% non-development charge component of construction projects. Alternatively, the link to the arena could be totally funded from the tax base.

The current Library construction/expansion program includes four facilities. The following illustrates the Library Facility construction impact:

	Forecast in 1999 DC Background Study		Actual Construction	Impact Incr/(Decr)
	Year	Sq Ft.	Sq Ft.	Sq Ft.
Angus Glen CC	2001	30,000	30,000	0
Markham Village Expansion	2002	10,500	10,500	0
Milliken Mills Expansion	2005	6,300	0	(6,300)
East Library	2007	20,000	0	(20,000)

Total Sq Ft For Library Facilities		66,800	40,500	(26,300)

It should be noted that the cost of the Library’s construction program is not fully recovered from development charges, therefore during the 2003 budget discussions, an allocation of $500,000 from the tax base was approved and is being set aside annually in a reserve for the non-DC funding that will be required.

COMPARISON OF OPTION 1 VERSUS OPTION 3

Operating Budget Impact:

The Library Administration staff reviewed the operating costs associated with both options and concluded that the operating budget impact would be the same for both option 1 and 3 ($283,850).

Capital:

Option 1 provides a two-storey addition to the south of the existing Library. A basement is necessary to support this structure and provides the opportunity for the Library Administration to relocate to this space. Option 1 meets the funding formula for the project and fully meets the Libraries’ functional and service needs. As indicated earlier, Library programs are eligible to be funded 90% from development charges with the remaining 10% to be funded from non-development charge sources. A 10,500 sq. ft expansion at the Markham Village Library was included in the 1999 Development Charge Background Study. The preliminary cost estimate for the construction of this option is $3,821,300 therefore the tax impact on this option is the required 10% non-growth component, or $382,130.

Option 3 provides a two-storey addition (10,500 sq ft) to the north of the existing Library. This option requires an additional 5,250 sq ft to be constructed to replace the meeting rooms that will be displaced by the Library Administration moving into the existing basement. As indicated in Option 1, the 10,500 sq ft expansion is eligible to be funded 90% from development charges and 10% from non-development charge sources. The additional 5,250 sq ft is not identified in the 1999 Development Charge Background Study and could be funded from non-development charge sources or by substituting the square footage from either the Milliken Mills Library expansion and/or the East Library.

The following chart illustrates the cost comparison between Option 1 and Option 3 excluding the link to the arena and the renovation:

		Funding Sources
	Preliminary Cost Estimate	DC	Reserve	Lease Offset 2+ yrs	Tax
Option 1:
New Construction	3,821,300	3,439,170	382,130
Finishing for Library ATS	530,450			530,450
Total for Option 1	$4,351,750	$3,439,170	$382,130	$530,450	$0

Option 3:
10,500 sq ft expansion	3,115,750	2,804,175	311,575
5,250 sq ft replacement of program rooms	1,236,000			530,450	705,550
Total for Option 3	$4,351,750	$2,804,175	$311,575	$530,450	$705,550

Comparison of Option 1 vs 3	$0	$634,995	$70,555	$0	(705,550)

As indicated in the chart above, the preliminary cost estimate for both Option 1 and Option 3 is the same, however the funding formula is different. Option 1 requires a supporting structure, which is eligible to be funded 90% from development charges and provides the Library Administration with the opportunity to utilize this space. Option 3 is constructed on grade, and requires an additional 5,250 square feet to be constructed to enable the Library Administration to relocate to the existing basement. Option 3 allows for less funds to be allocated from development charges ($634,995) as the 5,250 sq ft is a replacement of space already included in the inventory. This results in additional funding from non-development charge sources of $634,995 ($705,550 - $70,555).

Alternatively, the additional 5,250 sq ft could be funded 90% from development charges however a substitution in square footage from the Milliken Mills Library expansion and/or the Central East Library would be required. The decision to fund 90% of Option 3 from development charges would result in a tax impact of $435,175 ($4,351,750 x 10%).

Renovation:

As indicated in the report presented to the Committee of the Whole on March 9, 2004 there are benefits to integrating the renovation of the existing library with the construction of the new. The preliminary cost estimate of the renovation is $2,266,000. This cost includes the renovation of all three levels and would be funded from the proposed GST rebate of approximately $1,150,000, with the remainder of the funding to be determined by the Budget Sub-Committee through the review of the 2004 budget.

OPTION 3 WITHOUT THE LINK —PRELIMINARY PROJECT COST ESTIMATE

An additional option for the Markham Village Library is now being considered. This option is a two-storey addition on slab on-grade foundation, to the north of the existing Library as outlined in Option 3, without the link to the arena. This is the same as Option 3A Phase 1 as outlined in the Markham Village Library Expansion report presented to the Committee of the Whole on March 9, 2004.

The funding of the preliminary cost estimate for this option follows:

FUNDING SOURCES:

	Preliminary Cost	Funding Sources
Description	Estimate	DC	Reserve	Other
New Construction (incl. Site work)	$4,506,250	$2,943,225	$327,025	$1,236,000
Renovation of Existing building	$2,266,000			$2,266,000
	$6,772,250	$2,943,225	$327,025	$3,502,000

The New Construction of the Library in this option would be funded as follows:

10,500 sq.ft would be funded 90% from Development Charges ($2,943,225) and the remaining 10% ($327,025) funded from a Reserve previously established to fund the non-development Charge component of construction projects.
5,250 sq. ft ($1,236,000) would be funded from the elimination of the annual operating lease ($530,450) with the remainder funded from the tax base ($705,550)

The renovation of the existing building ($2,266,000) would be funded from the proposed GST rebate of approximately $1,150,000 with the remainder of the funding to be determined by the Budget Sub-Committee through the review of the 2004 budget.

CONCLUSION:

The construction of future facilities will result in competing needs for development and non-development charge funding, therefore staff recommend that Council approve the design of Option 1 as suggested in the Markham Village Library Expansion report presented at the Committee of the Whole on March 9, 2004. Option 3, with or without the link, is not recommended, as it will require additional tax funding of at least $634,995, and would require a transfer of development charge funding (and square footage) from projects currently included in the Town’s existing development charge background study.

ATTACHMENTS:

§ March 9, 2004 report to Committee of the Whole – Markham Village Library Expansion

Joel Lustig

Director, Financial and Client Services

Q:\Finance and Administration\Finance\SHARED\2004 Finance_Admin Cttee Reports\0420-Funding MVLibrary Expansion.doc

		FINANCE AND ADMINISTRATION COMMITTEE


	TO:	Mayor and Members of Council

	FROM:	Joel Lustig, Director, Financial and Client Services

	PREPARED BY:	Jennifer Nelson, Manager, Development Finance

	DATE OF MEETING:	2004-Mar-22

	SUBJECT:	Markham Village Library Expansion Funding and Analysis

Funding Sources

Net Operating

DC

Reserve

Other

Total

Link to Arena

Forecast in 1999 DC

Year

Forecast in 1999 DC

Year

CONCLUSION: