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Quesnel council approves long-term borrowing for new Public Works building

The anticipated payment per year for the City of Quesnel is $345,343 over 30 years
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The City of Quesnel’s new Public Works facility on Sword Avenue is expected to be completed this winter. (Lindsay Chung Photo - Quesnel Cariboo Observer)

Quesnel council has taken the final step for funding the new Public Works building.

Construction of the City of Quesnel’s new Public Works building is currently in progress, and it is expected it will be ready to move into sometime this winter.

As the final required step for funding the new building, council approved long-term borrowing through the Municipal Finance Authority of British Columbia (MFA) at its Oct. 27 meeting.

The 30-year financing is expected to be part of the MFA’s 2021 Spring Borrowing Session.

Following a referendum that supported borrowing money for the new building, council approved borrowing $8.5 million for the Public Works facility through a 2018 bylaw. Temporary loans have been used to fund the construction, which will be paid off with the final long-term debt issue, explained Kari Bolton, the City’s director of corporate and financial services.

For a municipality to participate in a long-term debt issue, it must apply to its regional district by way of a Municipal Security Issuing Resolution (MSIR), and at the Oct. 27 meeting, council voted to request the Cariboo Regional District consent to the City borrowing over a 30-year term and include the borrowing in a Security Issuing Bylaw.

The current interest rate expected for long-term borrowing is 1.5 per cent, according to Bolton, who told council this rate is for the first 10 years of the loan, and then it resets at the current interest rate.

The anticipated payment per year for the City is $345,343 over 30 years.

“This is lower than originally budgeted at 3.5 per cent and $416,164 per year,” Bolton wrote in her report to council. “The Financial Sustainability and Audit Committee (FSAC) discussed this at their Oct. 15 meeting. The committee discussed the option of shortening the term of the debt but decided that the savings from the lower debt payments could go towards the additional expected operating cost increases of the Public Works building — insurance, janitorial, utilities, etc.”

Coun. Martin Runge wondered about paying the loan off sooner so the City would have less debt over time.

“The FSAC did discuss that,” said Bolton. “The decision was made because the building is for the long-term use of the community, it’s better to spread out the cost over the long-term use so it benefits all those residents over that time period, and that way we can offset the increasing costs, because otherwise we’ll have a tax increase for the increased costs of that building. “

Mayor Bob Simpson noted that with public-sector financing, you have to look at equity over the generations that will pay for the facility.

“So over that 30 years, there’s 30 years of service for the entire community for that,” he said. “If you shorten that 30-year period, you’re just putting a higher burden on that tax base for that short period of time, and if you did that, in this case, then what you’re saying is the current generation not only is going to be accelerating the payments for the facility, they’re also going to be bearing with additional tax increases the incremental operating costs. So from an equity perspective as a public-sector finance, if you look at it over the 30 years, that is a more equitable distribution across our ratepayers.”

At the 10-year mark, council can revisit the term of the loan, according to Bolton.

READ MORE: New design and higher budget approved for Quesnel’s Public Works facility