By John MoorhouseFriday, December 22, 2006 http://www.pentictonherald.ca/article_2693.php
The price tag for the South Okanagan Event Centre project has jumped to $73.6 million -- up more than 30 per cent from the $56-million estimate last June.But that didn't stop Penticton city council Thursday from unanimously approving a contract agreement with Giffels Partnership Solutions Inc. to design and build the event centre.The $59.8-million contract with Giffels includes $54.7 million for the event centre itself, with the remainder for additional site preparation work. The city will contribute $13.7 million towards infrastructure improvements and the relocation of sports fields from Queen's Park.City officials blamed the "overheated B.C. construction market" for a dramatic increase in material and labour costs. Other factors include higher than expected site remediation costs, project changes based on input from various local user groups, and a general cost escalation rate of up to two per cent a month since Giffels' bid was submitted in April.Although property taxes will not rise more than the two per cent over three years council.png)
promised earlier this year, the city is relying on increased casino and electrical utility revenues to help pay the additional costs.The city will also reduce interest costs by about $9.5 million by paying off the project debt over 10 years instead of 20 as originally proposed. Giffels has agreed to drop its profit margin on the project by $1.2 million.Mayor Jake Kimberley said even with the higher costs, the event centre is still a bargain for the city. He acknowledged the price has increased substantially, but said it remains affordable."We are subject to the market in this process," he said. "We cannot control what the market does to us."Kimberley added as more high-profile developments come on stream in Penticton over the next few years, the city will realize increased tax revenues to help further defray the event centre bill.Coun. Garry Litke admitted he felt a "big gulp" in his throat when he first saw the revised figures on the project."It is a big gulp and it is a cause for concern," Litke said. "But the important thing is to get to that prize and I believe today we have achieved that prize."Coun. John Vassilaki said he's embarrassed that council didn't foresee the likelihood of a major cost increase earlier in the year. However, he added council never tried to mislead anyone and he fully supports the project.Coun. Rory McIvor said the city faces significant belt-tightening, especially over the next three years. "But in the life of a municipality, three years is a heartbeat," McIvor said. "It will be over before you know it."Peter Hall, senior vice-president with Giffels, signed the contract agreement with the mayor immediately following the council meeting. The contract means Giffels' price is now firm. The city has a $1 million contingency fund.Hall explained afterwards that Giffels' original $39.6-million bid last April was only firm for 60 days. Costs jumped after revised architect drawings were sent out for bids by contractors and suppliers in October.Suggestions made during a public meeting in June that the Giffels bid was firm until October were incorrect. City administrator Leo den Boer confirmed the company's written bid expired at the end of June.Although Coun. Dan Ashton said he's still waiting for Giffels to earn his trust in the project, Hall said that's a two-way street."They want to earn our trust, we want to earn their trust, and we'll do that," Hall said. "A public-private partnership is about trust both ways." Construction equipment is expected to move on site on Boxing Day, with the project to be substantially completed by September 2008 and completed by November 2008.Meanwhile, a contract agreement is soon expected to be signed with Philadelphia-based Global Spectrum to operate the event centre, Memorial Arena and the Penticton Trade and Convention Centre starting on July 1, 2007.
The price tag for the South Okanagan Event Centre project has jumped to $73.6 million -- up more than 30 per cent from the $56-million estimate last June.But that didn't stop Penticton city council Thursday from unanimously approving a contract agreement with Giffels Partnership Solutions Inc. to design and build the event centre.The $59.8-million contract with Giffels includes $54.7 million for the event centre itself, with the remainder for additional site preparation work. The city will contribute $13.7 million towards infrastructure improvements and the relocation of sports fields from Queen's Park.City officials blamed the "overheated B.C. construction market" for a dramatic increase in material and labour costs. Other factors include higher than expected site remediation costs, project changes based on input from various local user groups, and a general cost escalation rate of up to two per cent a month since Giffels' bid was submitted in April.Although property taxes will not rise more than the two per cent over three years council
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promised earlier this year, the city is relying on increased casino and electrical utility revenues to help pay the additional costs.The city will also reduce interest costs by about $9.5 million by paying off the project debt over 10 years instead of 20 as originally proposed. Giffels has agreed to drop its profit margin on the project by $1.2 million.Mayor Jake Kimberley said even with the higher costs, the event centre is still a bargain for the city. He acknowledged the price has increased substantially, but said it remains affordable."We are subject to the market in this process," he said. "We cannot control what the market does to us."Kimberley added as more high-profile developments come on stream in Penticton over the next few years, the city will realize increased tax revenues to help further defray the event centre bill.Coun. Garry Litke admitted he felt a "big gulp" in his throat when he first saw the revised figures on the project."It is a big gulp and it is a cause for concern," Litke said. "But the important thing is to get to that prize and I believe today we have achieved that prize."Coun. John Vassilaki said he's embarrassed that council didn't foresee the likelihood of a major cost increase earlier in the year. However, he added council never tried to mislead anyone and he fully supports the project.Coun. Rory McIvor said the city faces significant belt-tightening, especially over the next three years. "But in the life of a municipality, three years is a heartbeat," McIvor said. "It will be over before you know it."Peter Hall, senior vice-president with Giffels, signed the contract agreement with the mayor immediately following the council meeting. The contract means Giffels' price is now firm. The city has a $1 million contingency fund.Hall explained afterwards that Giffels' original $39.6-million bid last April was only firm for 60 days. Costs jumped after revised architect drawings were sent out for bids by contractors and suppliers in October.Suggestions made during a public meeting in June that the Giffels bid was firm until October were incorrect. City administrator Leo den Boer confirmed the company's written bid expired at the end of June.Although Coun. Dan Ashton said he's still waiting for Giffels to earn his trust in the project, Hall said that's a two-way street."They want to earn our trust, we want to earn their trust, and we'll do that," Hall said. "A public-private partnership is about trust both ways." Construction equipment is expected to move on site on Boxing Day, with the project to be substantially completed by September 2008 and completed by November 2008.Meanwhile, a contract agreement is soon expected to be signed with Philadelphia-based Global Spectrum to operate the event centre, Memorial Arena and the Penticton Trade and Convention Centre starting on July 1, 2007. 
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