Worst Case Scenario for Civic infrastructure borrowing could bring significant Utility Fund tax increases in years ahead

Monday's Council Discussion that has charted the borrowing process for infrastructure forward, provided for a mix of determination, hope and some stark reality that however it all shakes out, the city's taxpayers will have to pony up some significant money for Utility Fund taxes to service the borrowing debt,

Council received the report from the Chief Financial Officer on Monday evening and then introduced First, Second and Third readings to the following Bylaws: Infrastructure Replacement Design Loan Authorization Bylaw and Linear Liquid Waste Infrastructure Replacement Loan Authorization Bylaw.

But before they did, there was some significant conversation to the topic and some eye catching math for residents to give some consideration towards.

To start off the discussion, Councillor Barry Cunningham, noted of some commentary from the public comment period earlier in the evening,  asked the CFO to outline the impact of the cost to the residents in dollars.

"What's the actual cost in dollars going to be to liquid waste and water on utilities. We're very high at utilities and this is just going to be the straw that breaks the camel's back if it's too high ... if the Chief Financial Officer could give me some figures as to the individual cost to resident in dollars and not percentages I would appreciate it"

In reply, Ms. Bomben provided a breakdown towards the two loans that will be required 

"The expected increase for the five million dollars portion towards water would be 27 dollars and then for the sewer would be 23 dollars. And that would be the increase that would help to generate enough revenue to be able to service the debt over thirty years for that five million dollar loan.

For the larger 40 million dollar loan towards the sewer infrastructure plans, she reinforced that staff would be exploring all avenues towards revenue streams to reduce the impact on taxpayers.

 "As mentioned and this is the big caveat, that we are going to try everything we can to try and get other money instead of using the full amount of the loan. 

So the authorization as it stands right now, in the absence of other funding, the worst case scenario is those increases and taking out in what we're calling segments, to match up when the works would actually be done.  

Would hopefully buy us the time to be able find other revenues, or at least in the best case, that's the best case and the alternative is that we enter into a much better interest rate environment"

If that quest for revenue streams and better interest rates should fall short she then outlined a worst case scenario of the impact for that second  loan.

"In the current interest rate environment, and the worst case scenario with those percentages:

Year One would be a 109 dollar increase, Year Two a 163 dollar increase and Year Three 158 dollar increase, again absolute worst case scenario and none of us are relishing any of this.

But that is how much it would be in order to service a 2.284 million dollar annual servicing for 40 million dollars for thirty years for just that one particular loan"

To try to make the large sum more understandable, Mayor Pond used the analogy of getting pre-authorized for a mortgage and how it provides a demonstration that  you can borrow the money, noting that the city believes there are a number of ways that they could reduce the impact and that the CFO's numbers are a worst case scenario.

Councillor Cunningham observed how that would mean over 400 dollar increases to utilities by the third year in the worst case scenario, further asking how the City could use any Federal funding received towards the infrastructure. work.

The Mayor noted how the city has to show that it can participate in such infrastructure projects to the Federal government.

"This is, so that if the Federal Government gives us the money, we can participate as we promised to and so we will need to look to other sources of money. Resource Benefit Alliance other things that we're working on to bring this number down." 

City Manager Robert Buchan noted that city was pursuing a number of avenues to seek ways to reduce the impact and  secure additional revenues.

"Securing other revenues would allow us to actually direct some of the  debt servicing through those new revenues rather that to utilities. So we have that in our tool kit as well. 

So we're pursuing many avenues and I believe some of them will be fruitful to secure that additional revenues"

Council then discussed the options of an  Alternative Approval Process or full Referendum towards the loan authorization and how it works for the public to express their concerns.  With Councillor Forster noting of the lesser cost to the City of the AAP option. an seemingly offering her endorsement of that option.

"Looking at the forty thousand dollar cost of a referendum versus the seven thousand dollars to do it this way"

The CFO followed up by noting that once the first three reading were provided on the night the city would have to wait for the province to give their first level of approval before the city can start the consultation process. 

"Then there's a period of notification to the public, so after the second notification then the public has thirty days to respond back if its an alternate approval process ... we'll just say it won't start for at least two months probably, we have to wait for the province to come back. 

But there is a lot of information that gets posted on line, in the paper and there's a couple of weeks worth of that to be able to start the process and then the people can have their say"

Councillor Randhawa spoke to the need for the loan to access the matching grants to get the infrastructure work underway.

Councillor Cunningham asked for further confirmation that the fee increases would be in addition to the regular fees currently in place, 

"Does this worst case scenario 400 dollars on top of the five percent utility fees that we've been bumping up"

Something which the CFO confirmed for him.

"Yes, that's correct, because this would only be servicing the debt that would not cover the regular operations costs"

The Councillor once again reinforcing his views on the burden that the city is going to put on the taxpayers.

"You know this is putting one helluva burden on the taxpayers I know it has to be done and that. But here we are giving them an increase in taxes and then telling them that in the next three years we're going to be charging them another 133 to 140 dollars a year more in utilities.

I have faith in our staff and that but we're going to be looking for miracles to straighten this out" 

To provide some context to the discussion on how any Federal funding may be used , Mayor Pond provided a synopsis of the current funding in place and what the city is looking to access towards their water, sewer and road work ahead.

Councillor Skelton-Morven noted of the impacts on the public, while also noting of the use of some of the city's financial mechanisms towards the city's financial needs.

"I just wanted to address you know some of the pieces around risk. I mean when it comes to these finances and for me I just knowing families that are struggling right now, that are on fixed incomes, those pieces I know that are challenging for folks at home.

But I think of the absolute worse case scenario if we were to lose some of our main lines.  Which follows a complete system cavitation and that means collapses where you've got sections of town that have no water. Their property values tank, folks start losing employment and have to go elsewhere and loosing our population overnight ...

To be able to address this now, as gruesome as this is numbers wise, I mean this tax increase in particular could have been close to thirty six percent or north of thirty six percent, if we did not have Prince Rupert Legacy Inc and CityWest being able to inject capital into these projects ...

I think what about and the stuff that keeps many of us up at night is losing our entire system and having our town come to a standstill and where folks are having to line up at the Civic Centre because we're trucking water in like a third world country. ...

If we do not address this now, and it's not done now and we are just kick the can down the road as what's happened prior to our time, at this time we cannot afford not to" 

From those final comments, Council then moved the First three readings and set the course ahead towards using the Alternate Approval Process for the community to have their say if they wish on the borrowing plans.

The documentation to the Bylaw authorization can be reviewed through our preview piece of Monday.

The full discussion towards the Loan authorization planning can be reviewed from the City's video archive starting at the one hour nineteen minute mark.  

Council members may glean a sample of some concerns towards how the city approaches its financial plans from residents from the start of the Council session, when city resident Terry Sawka spoke to the prospect of utility increases at the 36 minute mark of the public comment period.

More on the City's Infrastructure issues can be explored through our archive page here.

A wider overview of the Monday Council session is available through our Council Timeline.