Staff Report #4
August 26, 2020
To All Commissioners
Re: 2021 – 2030 Capital Budget Program
- APPROVE the 2021 capital budget program of $16,448,500 comprised of the following programs:
|Bus replacement||17||$ 10,081,000|
|Information system software and hardware||200,000|
|Shop and garage equipment||200,000|
|Service fleet replacement||50,000|
|Bus stop amenities||550,000|
|Fare processing equipment||500,000|
|Province of Ontario (Provincial gas tax)||$ 2,511,800|
|LTC capital program reserve fund||753,000|
|Development charges – City of London||433,600|
|City of London||6,500,300|
|Federal gas tax program – C/L||2,866,000|
|Provincial – ICIP Project Funding||1,538,000|
|Federal ICIP Project Funding||1,845,800|
noting identified funding from the City of London of $6,500,300 and Federal Gas Tax program of $2,866,000 is subject to the approval of Municipal Council as part of the City of London’s 2021 budget approval process; and
- DIRECT the administration submit the recommended 2021 capital budget program, and provisional estimates for 2022 to 2030 to civic administration consistent with the City of London’s reporting format.
The recommended 2021-2030 capital budget program as summarized in Enclosure I is predicated on a strategy that focuses investment on maintaining infrastructure in a state of good repair and providing growth capital investment necessary to support the provisional operating estimates for 2020-2023 as set out in Staff Report #3, dated August 28, 2019, and updated for 2021 in Staff Report #3, dated August 26, 2020, and are in keeping with the Commission’s Asset Management Plan.
The following sets out discussion specific to each of the more significant areas of the capital budget program.
New Bus Program
The capital budget for the ten year period of 2021-2030 calls for the purchase of a total of 201 new replacement and expansion buses at an estimated cost (based upon 2020 dollars) of approximately $131.7 million. As noted in the following table, replacement buses account for 170 of the total 201 buses to be acquired. The number reflected in this budget do not include the buses required for the operation of rapid transit on the East London Link and the Wellington Gateway as the costs for same are included in the budgets for each of these specific projects.
2021-2030 New Bus Purchases
|Bus Replacement||170||$ 106,547,500|
Bus Replacement Program
A key component of the fleet management strategy was the establishment of a progressive fleet replacement program targeted to reach and maintain an average fleet age of six years.
Based on this strategy, over the period of 2021-2030, a total of 170 replacement buses are to be purchased requiring a total investment of approximately $106.5 million. The program funding is allocated between the City of London (52%), Federal gas tax program (28%), and Provincial gas tax program (20%), the details of which are set out in the table below.
Summary 2021-2030 Bus Replacement Program
|Bus Replacement||17||$ 10,081,000||153||$ 96,466,500||170||$ 106,547,500|
|Province of Ontario (PGT)||20%||$ 2,011,800||29%||$ 27,526,200||28%||$ 29,538,000|
|City of London||52%||5,203,200||46%||43,978,300||46%||49,181,500|
|Federal Gas Tax – C/L||28%||2,866,000||26%||24,962,000||26%||27,828,000|
|Total||$ 10,081,000||$ 96,466,500||$ 106,547,500|
At the April 17, 2020 meeting, the Commission approved the purchase of Operator barriers, with the initial source of funding being identified as reductions in a number of capital projects for 2021, one of them being the bus replacement program. Included in the recommendation was direction for administration to continue to seek an alternative source of funding for the Operator barrier project in an effort to avoid the need to reduce the other capital programs. Given the announcement of the Safe Restart Funding Program (see Staff Report #1, dated August 26, 2020), and the expectation that the Operator barrier project will be an eligible expenditure, the 2021 Bus Replacement Program as set out above has been reset to include the original number of replacement buses.
By the end of 2030, the fleet will have an average age of 6.0 years.
Bus Expansion (Existing and New Growth Areas)
The 2021-2030 capital budgets for bus expansion support the direction of the Five Year Service Plan Framework as approved by the Commission at its February 27, 2019 meeting. The bus expansion program requires the addition of 31 buses bringing the total fleet to 256 buses by December 2030. Note that the 2020 plan for four expansion buses was cancelled due to the deferral of the service growth and has been included in subsequent years. The details with respect to the expansion bus program including related funding is set out in the following table.
Summary 2021-2030 Bus Expansion Program
|Bus Expansion||5||$ 4,064,500||26||$ 21,135,400||31||$ 25,199,900|
|Provincial Government (ICIP)||33%||$ 1,354,700||33%||$ 7,044,600||33%||$ 8,399,300|
|City of London||16%||650,400||16%||3,381,900||16%||4,032,300|
|City of London DC’s||11%||433,600||11%||2,254,800||11%||2,688,400|
|Federal Government (ICIP)||40%||1,625,800||40%||8,454,100||40%||$ 10,079,900|
|Total||$ 4,064,500||$ 21,135,400||$ 25,199,900|
Of note, the Expansion Bus Program was approved for funding through the Federal/Provincial Investing in Canada Program (ICIP), with both levels of government approving their share of the funding for the program. The ICIP program covers the period from date of approval by both senior levels of government to March 31, 2028, and as such, expansion buses have not been included beyond this point.
Proceeding with the Expansion Bus Program for 2021 will be contingent upon the service growth budget on the operating side being approved for implementation in 2021.
The expansion bus program does not include the additional bus requirements related to the implementation of bus rapid transit.
In February 2019, the Commission approved in principle, the Strategic Assessment of LTC Facility Needs and Path Forward, which ultimately called for the phased replacement of the Highbury Avenue facility. A number of key findings included in the assessment with respect to the Highbury facility are set out below.
- the main building is now 70 years of age and well past its economic and design life;
- the building materials and, particularly, the concrete floors in the maintenance and storage areas, are in poor condition and deteriorating;
- the workplace areas and environment are sub-standard to current, modern facilities; and
- the existing buildings are energy inefficient and the interior layout, particularly in the maintenance and storage areas, presents on-going operational challenges.
As indicated earlier, given the significant incremental costs associated with moving the facility, a detailed assessment of the feasibility of constructing a new facility at the existing Highbury location was undertaken. The complicating factor with respect to this option is the need to continue to be able to service and maintain a significant portion of the fleet while construction is ongoing. A number of options were considered during this assessment phase, with the final recommended strategy being to rebuild on the Highbury site in a phased manner, providing the ability to continue to service and maintain buses while construction is ongoing. While this path forward is extended and more complicated as compared to a new build, it is the most cost effective when considering the all-in costs associated with both the build and the annual ongoing operating costs.
The estimated operating and capital costs associated with the recommended path forward are $6 million and $167 million respectively. The previously approved Capital Budget included a placeholder amount of $45.6 million related to facility replacement. This amount has not been amended in the 2021-2030 Capital Budget based on the assumption that the work would take place subsequent to 2030 unless a source of funding is identified that could move the project up.
In addition to the costs associated with the replacement of the Highbury facility, this program budget includes annual allocations for the ongoing maintenance of both the Highbury and Wonderland facilities which covers building structure, building systems (heat, light, water, air, etc.) as well as grounds and has a budget of $500,000 in 2021.
Summary particulars for the 2021-2030 facility upgrade program is set out below.
Summary 2021-2030 Facility Upgrade Program
|Annual Facility Upgrades||$ 500,000||$ 4,500,000||$ 5,000,000|
|Demolish/Rebuild Highbury Facility||–||45,600,000||45,600,000|
|$ 500,000||$ 50,100,000||$ 50,600,000|
|City of London||$ 500,000||$ 50,100,000||$ 50,600,000|
Information System Software and Hardware
For 2021-2030, $2.7 million has been identified for both new and upgraded system software as well as for new and replacement network/server/workstation infrastructure requirements. All program initiatives are prioritized.
For 2021, $200,000 has been allocated to the program which is supported by the capital program reserve fund. The moneys have been provisionally allocated for:
- $120,000 for the ongoing replacement/upgrading of system hardware infrastructure i.e. work stations, servers, etc.
- $80,000 for program updating of various management information data base system upgrades
The recommended capital budget includes a placeholder amount of $200,000 per year for each year thereafter (2022-2030 inclusive). Also included is $350,000 each for the replacement of the Finance and Human Resources systems (in 2022 and 2023 respectively) that are both beyond their expected useful lives. $2.5 million over the period is funded from the capital program reserve fund. The Information System software and hardware program is directly linked to London Transit’s Technology Plan.
Shop and Garage Equipment
Total investment in shop and garage equipment over the ten year period of 2021-2030 is set at $2 million. The budget provides for the purchase of new and/or replacement shop and garage equipment. Shop and garage equipment includes such items as steam cleaners, skid steer, forklift, pallet trucks, lifting equipment/systems, floor sweeper/scrubber as well as bus maintenance and servicing tools. The items purchased are based upon need (for new equipment) and useful life assessment when dealing with equipment replacement. The expenditure covers shop and equipment needs at both the 450 Highbury Ave N. facility as well as the 3508 Wonderland Rd facility. The program expenditures are fully funded from the capital program reserve fund.
Service Fleet Replacement
The LTC maintains a service fleet of ten vehicles. The vehicles are used by Operations staff (Inspectors), Planning staff and Maintenance staff e.g. mobile mechanic. The replacement of the vehicles is generally based upon a five to ten year lifespan dependent upon the nature and use of the vehicle. The vehicles to be replaced are subject to mechanical and structural assessment. For the purpose of the 2021-2030 budget, one vehicle per year is scheduled to be replaced for a total investment over the period of $500,000, with the exception of 2023, 2026 and 2029, when two vehicles are planned to be replaced given their current state of repair. The investment is fully funded from the capital program reserve fund.
The 2021-2030 capital budget program calls for $0.864 million investment in stop upgrades. Over the period of 2021-2023, the annual budgets associated with this program are significantly higher than the remaining years. This is due to the assessment of the changes that will be associated with the next five year Service Plan, and the number of stops that will be impacted. Subsequent to 2023, it is anticipated that the majority of re-routing with the current system will be complete and annual Service Plans will be dealing only with new stop locations for new services. The stop upgrades program deals with the ongoing annual expansion of the passenger shelter program and installation of cement pads. The installation of passenger shelters is undertaken on a priority basis with the selection being based upon a warrant system that considers boardings, service frequency and site conditions, etc.
Bus Stop Amenities
The Bus Stop Amenities program was new to the Capital Budget in 2020, as it was a project put forward for funding consideration under the Investing in Canada Program (ICIP). The program calls for the addition of 60 shelters which will include solar lighting and benches as well as 150 solar lit bus stops throughout the system. This program has been approved for funding by both senior levels of government. It should be noted that the current shelter contract that is in place will not cover the annual maintenance and repair of the 60 new shelters, and as such, there will be an incremental operating cost which has been included in the 2020-2023 Operating Budget projections. Note the budget included in 2020 has yet to be spent and will need to be carried forward to 2021.
Fare Processing Equipment
The Smart Card system launched in 2016 introduced OBV’s (on-board validators) and other communications equipment onto the buses as well as POS (point of sale terminals) that have been used in sales locations to revalue Smart Cards. Scheidt and Bachmann have introduced new technologies that can improve the revaluing process as well as phasing out older equipment identified as end of life. Additional capital of $500,000 in each of 2020 and 2021 for the addition of AVM’s (add value machines), hand-held fare collection and POS units is included in the program budget. AVM’s are units that can be strategically placed around the city that will enable riders to use credit/debit cards to add product to their cards or even just make inquiries relating to the status of their card avoiding the need to physically visit an LTC or a third party location. Hand-held fare collection units can be used both in the Specialized service setting as well as portable POS units for retail settings.
2020 Capital Budget Program
At the April 17, 2020 meeting, the Commission approved the purchase of operator barriers, with the initial source of funding being identified as reductions in two capital projects for 2020, the Stop Upgrade Program and the Fare Processing Program. Included in the recommendation was direction for administration to continue to seek an alternative source of funding for the Operator barrier project in an effort to avoid the need to reduce the other capital programs. Given the announcement of the Safe Restart Funding Program (see Staff Report #1, dated August 26, 2020), and the expectation that the Operator barrier project will be an eligible expenditure, the 2020 Stop Upgrade Program and the 2020 Fare Processing Program have been reset to include the original budgets.
It should also be noted that given the ongoing COVID-19 situation, as well as the historical need to carry forward projects that are either unable to be completed or that aren’t required at this time, some of these projects will be carried forward to 2021. Given they have been approved and have identified funding, they are included as placeholders.
I – Summary 2021-2030 Capital Budget Program
Mike Gregor, Director of Finance
Shawn Wilson, Director of Operations
Joanne Galloway, Director of Human Resources
Craig Morneau, Director of Fleet & Facilities
Katie Burns, Director of Planning
Concurred in by:
Kelly S. Paleczny, General Manager