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‘Perfect Storm’ continues to rage

Municipality faces large capital plan in coming years
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Photo by Maureen Provencal

By Alison Taylor

As Whistler heads into one of its most aggressive capital programs in recent years, there is no sign the construction industry is cooling off any time soon.

Trends plaguing the building industry in B.C. — labour shortages, the high costs of materials, and a plethora of jobs on the horizon — are only going to continue in the years to come, said Manley McLachlan, president of the British Columbia Construction Association (BCCA).

“If they put a budget together eight months ago, better go back and have a look at the budget or just start factoring it up by 20 to 30 per cent,” he said.

“I’m seeing this is a trend that’s going forward. Let’s put it this way — it’s not going to get any cheaper to build it next year.

“This is the new reality for the industry.”

Construction costs escalations are built into all municipal projects, taking into account all the factors affecting the industry at this time.

Still, it’s an unprecedented time of growth in the history of the province.

The BCCA estimates there is $128 billion worth of major projects on the books, which go beyond 2014. By comparison there was $60 billion on that list three years ago.

That demand is stretching an already thin labour force. A shortage of skilled labour is compounded by a retiring workforce for a workplace shortage in the realm of 40,000 people.

“Shortage of skilled workers has a direct impact on the cost of projects because it affects productivity and it affects schedules and it affects budgets,” said McLachlan. “So we know that that’s going to be a driver in this whole thing for the next seven to 10 years.”

And the price for building materials is going up even more in some cases.

“That trend is probably not going to turn down,” he said. “If anything we’re seeing a stabilization in the price of steel, but it’s still higher than it was three or four years ago — dramatically higher.

“We’re still seeing some increases in some of the other areas. And that won’t go away.

“We’re going to see higher prices than we’ve seen before.”

The climate has been called “The Perfect Storm” and it shows no sign of abating.

Perhaps the climate is most easily illustrated in the ongoing construction of the $11 million Whistler Public Library, built in the eye of the storm.

The project has competed for workers with other projects in the valley, such as the Sea to Sky Highway upgrades. It has seen the cost of materials escalate beyond projections. Tenders for projects were released only to have one company bid on the work at a price well over the budget. The project is now 39 per cent over the 2005 budget.

In hindsight, choosing a construction model that divvied up the project into smaller chunks and allowed local companies to bid on certain aspects of the library may have had an adverse impact on the budget.

It provides a cautionary tale as the resort municipality ramps up a busy construction schedule with $53 million committed in 2007.

Mayor Ken Melamed said this week that council is very aware of spending taxpayers’ money prudently.

“We’re trying to manage our risk in as prudent a way as possible,” he said.

“The fact is we’re not living beyond our means. We’re not borrowing into the future. And we’re adding tremendous legacies and much-needed infrastructure, not just to put on the Games, but for the future.”

Whistler Athletes’ Village

The $130 million budget for the athletes’ village cum employee housing neighbourhood has not changed since it was released in the business plan almost one year ago.

It is expected the resident housing will cost $230/square foot to build, based on 2010 dollars. That includes a five per cent annual increase on building costs. The budget also includes a 10 per cent contingency on all costs.

The municipality reiterated this week that it is sticking to the $130 million budget. It will kick in $8 million to the overall development.

Roughly $20 million will be spent on the site this year, the bulk of which will go towards servicing the site, located opposite Function Junction in the south end of town.

“We’re actually hoping to grow that contingency by savings on the servicing end. So far we’ve been successful,” said Eric Martin, chair of the Whistler 2020 Development Corp., which is responsible for the development.

The company saved $600,000 in a $6 million budget for last year’s site clearing work.

After the Games the village with its 251 units will be retrofitted and sold or rented as employee housing.

Sewage Treatment Plant upgrades

Budgeted at $33 million in the current financial plan, the sewage treatment plant upgrades are to get underway this year.

The tenders will come back at the end of June and staff will go to council for approval of the project in July. The budgets could be revised at that time.

To date, however, the financial plan details roughly half of the budget ($17.7 million) is to be spent this year with the remainder spent in 2008.

Melamed said this project is the one with the biggest risk because of the materials — concrete and steel — which may be needed to complete the project.

He expressed complete confidence, however, that one of the municipality’s most senior staff members was overseeing the project.

John Nelson is the former general manager of corporate services, formerly in charge of the municipal budgeting process.

“We have an extreme amount of confidence and a lot of expertise in delivering that project,” said the mayor. “I would say that’s probably the one that has the biggest risk because, I’m assuming, it has the most concrete and steel which are two of the more risky components.”

Municipal Hall renovations

This $5.7 million project is in the detail design phase. Part of that phase includes preparing cost estimates to renovate the hall.

After that, the municipality will issue a tender and that will provide updated construction costs and proposed timelines.

The project includes a new customer service centre, improved access to the building for persons with disabilities, a new council chambers/Emergency Operations Centre and additional office space to meet staff requirements.

It is expected that $1.5 million will be spent this year with the bulk of the project spending in 2008.

The municipality said this week that its top priority is to bring the structure into code.