City-Urbacon Settlement Brief

September 9, 2014

Blog

The City of Guelph is relieved to have reached a settlement out of court. This avoids further legal costs and gives certainty on what the cost impact is.

The settlement will be accommodated within the City’s capital financing guideline. This means:

  • It will not impact the property tax levy
  • It will not affect the City’s excellent financial position – including the City’s latest AA+ credit rating, which already included consideration of this potential cost
  • It is not expected to affect the City’s 10-year capital program.

There are sufficient funds in City reserves to fund the settlement. The reserves will then be repaid within the City’s capital financing guideline.

Specific reserves identified by the CFO are the capital asset renewal reserve, the Legal/OMB reserve and the capital tax reserve fund. The funds transferred from the capital asset renewal reserve fund will be repaid over a five-year period.

The City and Urbacon have agreed to release more information on the settlement than would typically be provided in a case like this because we recognize the high public interest in this matter. I want to thank Urbacon for agreeing to release this information.

I want to recognize something that has often been lost in this: we have a City Hall and Market Square that are functioning and serving the community well. These facilities have made a significant positive impact on service delivery to the community, working conditions for employees, and the beauty of our downtown. We now have a City Hall that meets the needs of a community our size – and it will continue to serve our community for decades to come.

There’s no question this legal dispute has been difficult. I am thankful that it has now been resolved, and that the costs are being managed to minimize the impact on taxpayers.

Thank you to Guelph’s CAO Ann Pappert, CFO Al Horsman, Urbacon’s CEO Marco Mancini, and Urbacon’s COO Ron Carinci for their diligent work in reaching this settlement.

The following are some questions and answers related to this settlement:

What are the details of the settlement?

In the spirit of disclosure, and recognizing the high public interest in this case, the City and Urbacon agreed to releasing more information on the settlement than would typically be provided. We are releasing the amount of the settlement, which is $6.635 million. The specific language and details of the settlement remain confidential.

How will this affect the City budget/ how will the City pay for this?

The settlement will be accommodated within the City’s capital financing plan. It will have no impact on the property tax levy, will not affect the City’s excellent financial position, and is not expected to affect the City’s 10-year capital program.

There are sufficient funds in City reserves to fund the settlement, and reserves will be repaid within the City’s capital financing guideline.

Funding sources identified by the CFO are the capital asset renewal reserve, the Legal/OMB reserve and the capital tax reserve fund. The funds transferred from the capital asset renewal reserve fund will be repaid over a five-year period.

The settlement will involve a total new cost to the City of $5.58 million, because $800,000 still remains of a $3.2 million holdback the City has already paid into the court.

Which capital projects will no longer happen because of this?

The settlement is not expected to affect the City’s 10-year capital program. There are sufficient funds in City reserves to fund the settlement, and the repayment of those reserves can be accommodated within the City’s 10-year capital financing guideline.

How will this affect the City’s credit rating?

It will not affect the City’s latest AA+ credit rating. That credit rating already included consideration for a potential payment amount, because the City reported a potential cost to Standard and Poor’s.

How much has the City spent in legal fees? Total legal costs, including lawyer’s fees, mediation, expert witness fees and reports, are $2.23 million as of August 31st, 2014. Legal expenses will be paid from the capital asset renewal reserve.

What of the other litigations connected to this one? Will there be additional financial implications from those? This settlement allows the City and Urbacon to quickly resolve other litigation in place as a result of this suit. The only potential additional financial implication is that the City must settle the issue of Aviva’s costs in the legal action taken against Aviva (the insurer). This is not part of the settlement with Urbacon and the City will deal with Aviva directly on that.

What has the City learned from this? What would it do differently next time? There have been lessons learned on both sides. This was a large and complex capital project. The City has already made some changes in how we approach large capital projects in order to prevent issues in the future.

Today, Guelph has a well-functioning, award-winning City Hall and Market Square that have made a tremendous positive impact on service delivery, working conditions for employees, and the beauty of our downtown. These facilities will serve our community well for decades to come.

What was the total cost of the City Hall and POA Court project, including this settlement and legal fees – and how much did it exceed the original budget? The entire project (including City Hall and the POA Court) ran a deficit of $257,000 before legal fees and settlement costs. After legal fees and settlement costs, the total project deficit is $8.34 million on a $57 million project.

What is the Capital Asset Renewal Reserve Fund and what it is intended to be used for?

This reserve is intended to fund future capital projects. Its purpose, per Council-approved policy, is “to ensure that the one-time revenue from the disposition of the City’s interest in Guelph Hydro and other significant assets is preserved to assist with the financing of capital assets in accordance with the limitations set out in this policy and not used for other projects or programs.”

This reserve has sufficient uncommitted funds to cover the settlement amount. The fund will be repaid with interest over a 5-year period.

About Karen Farbridge

An unwavering change maker seeking a just, democratic and sustainable world.

View all posts by Karen Farbridge

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