The City is taking steps to put the financing in place for several upcoming major capital projects approved in the 2022-2026 Financial Plan.
At their meeting on June 21, 2022, Council will be asked to amend the Financial Plan to reflect current cost estimates, and give readings to bylaws that would authorize the City to borrow $12.9 million of the $18.7 million estimated to upgrade and expand the Advanced Waste Water Treatment Plant and the Ridgedale Reservoir, and to replace the Penticton Avenue Pressure Reducing Valve. The remaining amounts would be funded through Development Cost Charges (DCC) and grants, if successful, and debt payments would be funded by DCC reserves and user fees.
“These projects are all necessary improvements that need to be made to either accommodate growth in the City or ensure reliability of our services for existing residents,” says Angela Campbell, the City’s Director of Finance and Administration and Chief Financial Officer. “Given the current interest rate environment, and the aging infrastructure that needs to be serviced within the next 5 to10 years, it’s a reasonable time for the City to undertake borrowing for these critical projects.”
Currently, the City’s debt servicing levels have dropped from 46.25 per cent to 12.88 per cent following the repayment past borrowings, including the South Okanagan Event Centre, putting the municipality in a favourable position to take on debt. Staff are recommending a 20-year debt borrowing term for each of the projects based on historical loan terms, the life of the asset, cost to rate payers and estimated debt servicing costs. Should Council give the bylaws three readings, the next step in the several month process to secure financing is a review by the Inspector for the Municipal Finance Authority.
Council will also be asked to approve the terms to repay the funds borrowed internally from the City’s Electrical Surplus Reserve for an additional three projects including Section 2 of the Lake-to-Lake Bike Route, the Point Intersection and a new two-bay garage at Fire Hall 2. The estimated combined cost for the projects is $9.3 million, of which $7.4 million will be financed with funds borrowed from the Electrical Surplus Reserve and the remaining $2.2 million needed for the Point Intersection will be funded through Development Cost Charges. With Council’s approval, the City will repay the loans over 10 years using gaming revenues received from the Casino for the bike route and the two-bay garage and funds from the Asset Sustainability Reserve for the Point Intersection.
“The approach to funding these projects is intended to ensure minimal impact to taxpayers,” says Campbell. “By borrowing internally from the City’s electrical reserve on a 10-year term, the City will save an estimated $3 million of interest charges compared to borrowing externally.”
Copies of the reports can be viewed at penticton.ca as part of the agenda for the June 21, 2022, Regular Meeting of Council.