Borrowing Bylaw 1326 2013 Loan Authorization

At the council meeting on Tuesday, Dec 3^rd 2013, Council will consider reading bylaw 1326 2013 Loan authorization for $5 million to cover the town’s portion of the New Building Canada Fund (NBCF) grant application. I would like council to consider delaying the reading of the bylaw until after the staff has been given the opportunity to investigate alternative sources of funds to satisfy the town’s contribution under the NBCF grant. Only then will council have the data to make informed decisions on the amount and  timing of any short-term borrowing that may or may not be required.

Step 1: Reallocation from the 5-year plan capital budget

Staff should identify all of the water, sewer and road projects from the list of capital projects in the 5-year plan and determine if those projects would qualify under the NBCF. These projects could then be added to the list of NBCF projects and the capital re-allocated to satisfy the town’s contribution for the NBCF. 

Step 2: Reserve Allocation

If insufficient funds are identified in step 1, then the staff should determine if the addition of funds from the water, sewer and road reserves would be enough to satisfy the town’s contribution to the NBCF. 

Step 3: Leasing and short term borrowing

After steps 1 and 2 have been exhausted then the staff should determine how much capital could be preserved and reallocated to the NBCF by the use of leasing and short-term financing for larger capital items such as trucks, graders and plows in the 5-year budget.

Step 4: Long term borrowing

After steps 1,2 and 3 have determined how much of the town’s contribution can be funded by reallocation of funds from existing capital, council will the be able to make an informed decision as to the amount and timing of any long term borrowing to satisfy the town’s contribution under the NBCF grant application.

The opinions expressed in this Blog are my personal opinions and may not represent the opinions of other councillors nor the opinions of council.

NCBF alternatives to borrowing

The end game is to secure $10 million in NCBP funding to address the ongoing and accumulated water, sewer and road infrastructure deficit. We should strive to achieve this end with the minimum impact to the town’s balance sheet while maintaining maximum financial flexibility. Council should also consider a process that achieves this end with the highest probability of success.

Borrowing will have a negative impact on the town’s balance sheet and severely limit the town’s future financial flexibility. Borrowing will also require a referendum which introduces significant risk of failure. For these reasons, I would like council to reconsider its decision to proceed with a borrowing bylaw for $5 million and investigate other alternative sources to fund the town’s portion of the NBCP.

Alternative sources of funds

The NCBF has a 10-year grant life, which according to Focus Engineering, would require annual funding from the town of under $500k per year for 10 years. To secure the NCBP grant, the town must demonstrate, to the satisfaction of the grantors, that the town can and will dedicate $500k per annum to the NCBF. Can this be shown?

The 2012 Town of Golden annual report (page 39) shows the revenue and expenses for water and sewer services on schedule 3. The combined amortization for water and sewer in 2012 was reported at $580,859. This is the amount of money that should be either expended on water and sewer capital projects or, if not spent, transferred into the water and sewer reserve funds. Dedication of this amount to the NBCF will more than satisfy the grantor’s requirement of demonstrating the town’s ability and resolve to provide the matching funds.

The 5-year plan for water and sewer presented to the Mayor’s Finance Committee on November 22, 2013 shows a projected surplus before amortization of $754,183; ($312,780 for water; $441,403 for sewer). This is more than enough to cover the annual amortization ($590,859 in 2012) meaning that the water and sewer can now be considered to be self financing. The 5% increase in water and sewer rates anticipated for 2014 will put the water and sewer in a healthy surplus even after allowance for amortization.

Over the 5-year period 2014-2018, the projected surplus before amortization is $3,665,602 or an average of $733,120 per year. This is again more than enough to cover the anticipated maintenance and the town’s portion of the NCBP.

Effect on Existing Capital Program

Staff have developed an inventory of 19 suggested projects that should qualify for the NBCP over and above the existing budgeted capital in the 5-year plan. Would dedicating $500k to the NBCP affect the town’s ability to complete the existing budgeted capital?

At the Finance Committee meeting on November 22, 2013 I asked if the major expenses in the water and sewer capital budget would qualify for the NCBF. The staff responded that, subject to receiving and checking with the NCBP, the majority of the large capital expenses would qualify for the NCBP. When the NBCP granting application is made these projects would have to be included.

Hence there would be no impact on the town’s ability to complete projects in the existing 5-year capital budget. Combining the major projects from the existing 5-year capital budget with the 19 suggested projects would result in a NBCP grant application of more than $10 million. If the town wanted to stay at the $10 million level for the grant then some of the 19 suggested projects would have to be delayed or included in another grant application.

Leasing and short-term debt

Under the heading of General Capital, the big ticket items are the loader and plow truck. Normally buying these items outright is the cheapest way to proceed. Should it be required,  leasing or short-term borrowing facilitates the preservation of capital allowing the town to take full advantage of the NBCP without resorting to long-term borrowing.

Conclusion

Quite clearly, it can be demonstrated that the town generates sufficient funds from the water and sewer utilities to more than cover the town’s portion of the NCBP.

If the major water and sewer projects from the existing 5-year capital budget are included in the NBCP grant application, the town will be able to complete these projects in a timely manner.

The town has the financial flexibility to use leasing and/or short term borrowing to address general capital requirements should that be required to preserve capital for the NBCP.

Obtaining the NBCP grant without borrowing will maintain maximum financial flexibility should the town need to borrow funds in the future. This process also carries an almost 100% probability of success as it will not require the approval of the electorate.

Recommendation

I recommend that the town not proceed with the borrowing bylaw at this time.  Instead I propose that council request that the town staff determine if the dedication of $500k per year for the next 10 years from the water and sewer utility revenues, to fund the town’s portion of the NBCP, is feasible.

The opinions expressed in this Blog are my personal opinions and may not represent the opinions of other councillors nor the opinions of council.

Kicking Horse Culture survives the demise of GAI

Since 2006 the Town and the CSRD have provided joint annual funding through Golden Area Initiatives (GAI) to fund the Cultural Services Contract held between GAI and Kicking Horse Culture (KHC). Since 2009 the value of the town's contributions has been $60,000 annually, funded by local property taxes. An additional $60,000 has been contributed annually by the CSRD.

With the imminent termination of the tripartite agreement and the uncertain future of GAI, the contract with KHC and its funding arrangement are in question.

At the council meeting on Nov. 5th 2013, Council voted to replace the GAI as the contract party under the Cultural Services Contract and to solicit the CSRD for funding through the Economic Opportunity Fund (EOF). The EOF account represents an annually replenished source of funds provided through the regional district by BC Hydro as a part of its Grant in Lieu of Taxes (PILT).

The CSRD in a letter dated October 22, 2013 has confirmed that Director Habart supports the $120,000 request for KHC operational funding for 2014. Historically the EOF has contributed $100,000 annually to the GAI; this funding will cease December 31 2013.

The opinions expressed in this post are my personal opinions and may not represent the opinions of other councillors nor the opinions of council.

Council ceases funding GAI

The town gave notice in May 2012 of its intent to withdraw from the Golden Area Initiatives (GAI) funding agreement which now terminates on December 31^st, 2013.  For the first six months of this year a select committee of council including local volunteers researched, consulted, and deliberated what the future of economic service delivery could look like for community.  In July its recommendation to Council was a return to a municipally staffed function based on joint funding with the CSRD.

The Columbia Shuswap Regional District confirmed in a letter dated October 22^nd 2013, that they are unwilling to accept the Town of Golden’s proposal for the delivery of such services under a municipal “in-house” model. As a result at its regular meeting held November 5^th, Town of Golden Council voted unanimously to cease all funding for GAI. 

For the past ten years, GAI has been funded by a partnership between the two local governments to provide economic development services.  Each has contributed approximately $85,000 per year from general taxation with another $100,000 sourced from the Economic Opportunity Fund (EOF) which is a portion of BC Hydro’s annual payment in lieu of taxes to the regional district.  The town estimates that without the assistance of the regional district or access to the EOF account, meaningfully funding an in-house position and operating budget would at least be in the range of $150,000 annually.  

The opinions expressed in this email are my personal opinions and may not represent the opinions of other councillors nor the opinions of council.