City staff are looking to council for permission to borrow $15 million for water and sewer projects sooner rather than later to avoid high interest charges.
Myriah Foort, the city’s financial accounting supervisor, said if the city applies to the Municipal Finance Authority for a long-term loan as opposed to temporary borrowing, more interest will accumulate. The timing could also be off, particularly because the finance authority only issues funds twice per year, in the spring and in the fall, and it takes two months to process an application, which also requires approval from the regional district.
“In an effort to save money (interest charges), staff are recommending that council adopt these temporary loan authorization bylaws which would permit the city to draw needed funding any time of the year,” Foort said in a report to council. “If council does not adopt these two bylaws, the city would need to lock into long-term debt two times per year ahead of when the funds are required. This could result in borrowing in excess of what is required if projects come in under budget, or possibly not borrowing enough if projects progress more quickly than expected.”
Council approved borrowing $10.2 million for water projects and another $4.8 million for sewer infrastructure upgrades at a council meeting Oct. 8. Council secured the public’s permission to proceed with the borrowing through the alternative approval process which required voters to sign an opposition form if they weren’t in agreement.
One of the key projects that will benefit from the borrowing is the new drinking water system, which will replace the existing one the city shares with BC Hydro.
That system will be removed when BC Hydro eliminates the three penstocks currently in place as part of its John Hart Generating Station improvement project.
“The city is expected to utilize approximately $3 million of debt funding for this project in 2014 with our 25 per cent share of the costs (Hydro is funding the remaining 75 per cent),” Foort said. “By having authority to borrow short-term on projects like these the city can ensure steady cash flows throughout the construction period.”
Foort said temporary borrowing can only be used for up to five years, but as projects are completed city staff will request to transfer the loans to long-term borrowing when the finance authority issues its spring and fall funding.
Council was expected to make a decision on the borrowing at Tuesday evening’s council meeting after the Mirror went to press.
The funding is expected to go towards water main improvements, a water booster pump station, a chlorine facility upgrade and an expansion to the Beaver Lodge reservoir.