Borrowing rationale for Canada 150 project

Sharon McLeay
Times Contributor

 

At the Jan. 25 council meeting, Strathmore councillors said they have given extensive thought to both the pros and cons of borrowing $6 million for the Canada 150 projects.
They accepted the advice given by Director of Corporate Services Mel Tiede, who outlined at the meeting why it is a good time to borrow.
“These capital budgets will provide long-lasting improvements to the community,” said Tiede. “Borrowing at this time, during the present economic cycle, provides the Town of Strathmore an opportunity to acquire and improve tangible capital assets, at a point in time when interest rates are at a historic low point.”
Tiede expects interest rates to increase about .06 percent this year and speculates if council waits, interest rates may rise to 4.5 per cent in the next two years, which would potentially add $1.1 million to project costs. Council previously set goals with consideration for strategic action, taking advantage of good opportunities when they become available. This is part of the town’s long-term planning. Tiede said the town will pay off previous loans by the end of 2018.
However, the $6 million loan will push the town’s debt limit from 22 per cent to 39, negating previous efforts that have reduced the debt load to 22 per cent.
Councillor Steve Grajczyk said that in the past, council has paid for not taking advantage of opportunities as they arise.
“We are thinking in advance for everybody. We always double our money, when we don’t do it at the opportune time,” said Grajczyk.
“As far as council being prudent and conscientious in spending … in the last six years we have spent approximately $10 million on roads curbs, gutters, sewer and water upgrades, without any expenditures for the tax payer. Just saying how conscientious we are. I want to applaud my fellow councillors. We are conscientious.”
A major part of the $6 million loan will go to buy land and build the new administration building.
CAO James Thackray said the present building is 35 years old and in disrepair. It has asbestos and mold problems, the roof and windows leak, and office spaces are overcrowded.
Other deficiencies noted were that council chambers are too small, storage limited and important documents have to be securely stored offsite.
“The town has largely outgrown this office space. The building attached to this is a cabana and it is at maximum. It was intended as a short-term facility, but has been in use for 10 years now,” said Tiede.
“I readily admit this bylaw is the most difficult bylaw that I have had to deal with as a councillor,” said Councillor Bob Sobol.
He said that even with the borrowed funds, the town debt is lower than it has been in the past and consideration should be given that borrowing rates are at an all-time low. He also listed many of the building’s deficiencies and said moving Strathmore’s Family and Community Services to a new building with town staff will expand needed space for the local library.
“As a councillor of this municipality, I have been concerned for a number of years on the conditions we have asked our staff to endure in this particular building. I am at times embarrassed to see what they have to endure … this has constantly landed on the back burner because of other priorities. I would say this appears to be a priority at this time,” said Sobol.
Councillor Pat Fule champions the call for more recreation facilities, like a new arena. However, he sees many positives in these projects.
“We are elected to be stewards and make wise decisions in our spending and decisions for our townspeople,” said Fule.
He outlined the positives mentioned by others about borrowing at this time.
“If ever there was a time to plan for a new building and infrastructure, I would say that this is the time to do it. There are situations that come up where you just have to do it.”
He mentioned recent investment by the town in the fieldhouse and walking track to provide recreation for Strathmore residents. Improvements are also set for the swimming facilities. Tiede assured Fule that these projects would not financially handcuff the community in other recreation development in the future.
“It may defer a project for about two years, but won’t have a long-term effect,” said Tiede.
Fule added that the projects will create jobs and once the projects are complete, it will draw people to Strathmore.
Councillor Peterson said she was cognisant of the consequences that debt has on families and future generations, but continued community growth requires improvements.
“One of things I looked at was the need for the community to thrive, and in order to do that it needs to grow. Promoting growth in this community requires revitalizing our community,” said Peterson.
She introduced municipal finance research from the World Bank Group, Canadian Journal of Urban Research and a 2016 Jefferery Sellers article on Metropolitan equality and governance.
She said that the conclusion was autonomous metropolitan borrowing creates and supports decentralization.
“In an era of growth management boards, we will have a very limited autonomy compared to what we once had … one of the things that gives us autonomy is the capacity to borrow and build. When municipalities are able to borrow on the strength of their own plans, it reflects the desires of their communities; through management and finances, we then will have the financial muscle to implement local priorities. It will be a made-in-Strathmore plan, for a made in Strathmore future. I know we are in the right place at the right time with this. The research supports this.”
Mayor Michael Ell summarized the points of his fellow councillors. He said increases to Strathmore’s population and businesses will help lower payments and a new municipal building will decrease current maintenance expenditures. He also said rental of the present building could generate funds and those could be applied to the loan, or the building could be re-designated for other purposes.
“By doing it now, there is a huge benefit for us,” said Ell. “I think it is fiscally responsible to pass this bylaw tonight.”
Some council members had exceptions to parts of the project.
“This makes no sense to me,” said Councillor Rocky Blokland. “I have a lot of citizens ask me and say the descriptions for this are very vague … this borrowing bylaw is also on top of $2 million borrowed for the field house and another million borrowed for the Radway purchase last year … that is $9 million dollars in one year. As a business owner in times of economic uncertainty, you tighten up and don’t spend. As a councillor, I would like to use the same philosophy. This property purchase is not urgent and not necessary at this time. I strongly urge council to defeat this borrowing bylaw on second reading.”
He stated that the new building might not be adequate and prove inefficient in the later years.
Councillor Brad Walls did not like that so many projects were included under one omnibus bylaw.
Tiede classified it as a basket of projects with no specific amounts set for each part of the project at this time.
“I do see the need for a new municipal building and some of the improvements to the Aquatic and Lambert Centre. My mind has a hard time with the rest of this … I am leaning to not supporting this bylaw because I cannot see the need for the decorative lights and pathways in this project. I am partially supportive, as these hardworking men and women of our town need a new building. I would like to see the breakout costs,” said Walls.
Council passed second and third reading of Bylaw 16-21. Those councillors opposed were Blokland and Walls.