Borrowing $1.6 million versus spending internal resources is Trail council’s preferred way to cover incremental costs of the Riverfront Centre.
City leaders made the decision during Monday night council, agreeing unanimously that taking the money from current reserves will only hurt residents in the long run.
“There is financial capacity to manage (this) within the capital plan,” Trail Mayor Mike Martin emphasized. “But if we do that it will take away from significant infrastructure refurbishments that we need to do over the next number of years, particularly with our roads and sidewalks.”
For the average homeowner that boils down to a $62 overall increase in 2017 property taxes to pay for construction and fittings like shelves, furniture and fixtures in the new integrated library/museum.
“This is a very firm commitment by council on this project and probably will be the last we make,” said Coun. Robert Cacchioni. “The building committee is looking to build something for the next 50, 60, 70 years and moved to purchase the property next to it and it’s very fitting with the downtown plan…it’s not going to be a square box on the corner.”
Notably, there’s further to go before the city can actually increase its $6.3 million loan authorization bylaw to almost $8.4 million – the move is first subject to both provincial and local taxpayer approval.
After review and approval by the B.C. Inspector of Municipalities, the city must then twice publish its intent to increase borrowing through the Alternative Approval Process, giving Trail residents 30 days (from the second ad) to gather 10 per cent of taxpayer signatures and petition the decision.
Only when the process passes elector assent can the city take out the loan for the Riverfront Centre construction, which currently nears $8.4 million, about $2 million over the original budget.
“Moving forward effectively with the loan authorization now spreads the loan capital over 25 years and will allow us to enlist some of the other pressing need within our community,” Martin added. “This is a very worthwhile step to take and secure what will be a real landmark in this community for years to come.”
Debenture debt is recommended as the funding source given that the payments are spread over a longer period of time and effectively matched with the use of the building, Chief Administrative Officer David Perehudoff clarified.
“Further, when considering inflation, the cost of repaying debt actually declines over time when considering the debt is based on present value dollars and the fixed debt payment is paid out based on future value dollars,” he explained. “Which in real terms when considering inflation, will decline.”
The current level of general capital funding from revenue that is available is $2,334,900, continued Perehudoff.
“Therefore, if the City had to fund the incremental cost of $1.596 million in 2017, it would represent the utilization of 68.34 per cent of total general capital moneys available from revenue,” he said. “This would have a significant and detrimental impact on the City’s capital plan not only in 2017 but going forward given that identified projects would need to be deferred and the City would therefore by playing “catch-up” for the foreseeable future.”