Anticipated savings unrealized, event centre cost rises

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This article was published 01/01/2024 (443 days ago), so information in it may no longer be current.

A plan to save $14 million through a redesign of the Southeast Event Centre failed to achieve those goals, Steinbach city council learned on Tuesday night.

The project initially pegged at $42.5 million thanks to 2019 estimates shocked council when the lowest bid came in at $75.3 million.

Council forged ahead, by declaring approval for a $61 million project which anticipated $14 million in savings thanks to a redesign with the City of Steinbach and Graham Construction.

But in a report to city council, city manager Troy Warkentin explained only $6.2 million in savings could be found.

That resulted in council unanimously approving an increase in the event centre construction budget of $8.5 million, from $61 million to $69.2 million.

That 13 percent increase was deemed necessary by council who gave full credit to city staff for doing their best to lower costs.

“Some of the savings that had been hoped for were not realized to the degree that we had expected,” the motion’s mover, Coun. Michael Zwaagstra said.

Initially there were many ideas to lower costs.

The construction schedule was changed to a single stage, and a secondary ice plant was eliminated.

Initial cost cutting plans also included replacing structural slabs with slab on grade and changes to the mechanical heating/cooling system.

“Challenges arose as the team ran into constraints with poor soil conditions raising too high a risk of slab movements with a slab on grade option, and the complexity of redesigning of the mechanical systems caused a push of the redesign schedule past March 2023,” Warkentin wrote in his report.

A plan to reduce the cost of structural steel also failed to become reality after analysis showed they couldn’t change the plan.

They were also hesitant to change the plan too much.

“More cost saving options were proposed, however, those changes would also be driving the finished building toward the look and feel of a traditional recreation centre, which contradicted the initial efficiency and long-standing desire of the ownership group of this building,” he wrote. “Additionally, building efficiency and the desired long-term operational functionality of the building would be compromised, which would in turn potentially impact federal funding.”

Council approved the increased $8.5 million in spending, with provincial government funds taking care of 42 percent of the increase.

That’s because the province had given the city an additional $1 million for this project and $2.6 million in unexpected funds that could be spent wherever the city liked.

An additional $2.5 million will be raised through a debt issue, $1.5 million will come from the general operating fund and $850,000 will come from the land and building reserve fund.

Earlier this year, council had approved a $5 million borrowing bylaw in the event additional funds were needed. That means no additional public hearing has to be held on the $2.5 million they decided to borrow.

“We knew this was a possibility, that’s why we had preapproved borrowing up to an additional $5 million,” Zwaagstra said. “We’re only using $2.5 million of that.”

With initial project estimates, the city would have paid $10 million for a $42 million project, close to 24 percent of the total project cost.

Now the city’s share will total $30.675 million of a $69.2 million project, close to 44 percent of the total cost. Provincial and federal money will account for $18.5 million and private donors will pay $25.5 million.

“We’re still on the whole getting a good deal, in that we’re contributing less than half of the total cost,” Zwaagstra said.

While he credited staff for looking for savings, he said they also weren’t prepared to cut corners and remove key components.

Seconder Coun. Jac Siemens echoed many of the same sentiments, adding that they always knew cost increases were possible.

“We knew from the beginning that with the redesign, potentially there would be a need for more funding put in place,” he said.

But he was confident council would not face this type of problem again.

“This is, to the best of everyone’s ability, this is the final price,” he said.

Coun. Jake Hiebert agreed and said while the project would have been cheaper years ago, it would be much more expensive a few years from now.

“Had this council not proceeded I don’t see how Steinbach would have got an event centre like this in the future,” he said.

Funk also expressed his support for the resolution, and discussed what it could mean for Steinbach.

“I think that the entire community will be able to use this facility,” he said. “I think it will bring a lot of people from the region into Steinbach and there will be much benefit from that.”

Despite the cost-cutting exercise, Warkentin said construction is on schedule with completion still expected for late 2024.

The first shovel went into the ground in November 2022 with the official sod turning taking place in January, 2023.

Piling and grade beam work and the Centennial Arena demolition is complete.

Concrete and masonry unit work is about 50 percent complete and precast concrete for tiered seating and hollow core concrete flooring installation has started with an estimate completion of January.

Steel structure and framing will take place through March. Graham Construction is expected to begin closing in the building in February.