Debt financing for the Elora Waste Water Treatment was on the agenda of Centre Wellington’s Sept. 10 committee of the whole session.
Along with a report from chief financial officer Wes Snarr was a recommendation that council pass a bylaw authorizing the mayor and chief financial officer/treasurer to execute a combined loan and grant agreement with the Federation of Canadian Municipalities as Trustee of the Green Municipal Fund.
Further, the council was requested to pass a bylaw authorizing an application to Wellington County requesting it to incur debt and issue debentures in respect of the capital works of the applicant municipality;
In addition, the recommendation asked that the CFO/treasurer be authorized to restructure existing debt as outlined in the report.
Councillor Walt Visser first commended Snarr’s work on restructuring the debt load for the project.
However Visser also wanted to know if the move would have any impact on local taxes.
“This has no impact on the tax bill,” Snarr said.
He explained that since the restructured debt requires $80,000 less in financing from general capital reserves, “it could have a positive impact.”
Councillor Kirk McElwain said if the minimum interest rate was two per cent, “is there an upper limit?”
Snarr said that with the Green Municipal fund there is no upper limit.
“It is the federal government borrowing through its own debenture process – basically we’re getting their rate. That’s how it works in a nutshell.”
He went on to explain that it is very different than the traditional municipal bond market.
“The probability of the rates going up in the next year is minimal.”
Snarr said he saw no change in the rates.
McElwain then asked what would happen if the economy does change during the lifespan of the loan?
Snarr clarified that the interest rate is fixed for the 20-year period.
Mayor Joanne Ross-Zuj noted that within the past three days she’d talked with a Brantford municipal representative who complemented Centre Wellington for the attention it was paying towards its waste water treatment.
“They were thrilled we were doing this since they take their drinking water directly from the (Grand River).”
She added “We were also trying to strongly suggest that the other municipalities between Centre Wellington and Brantford do likewise.”
Councillor Walt Visser quipped “can we send them a bill?”
Councillor Steven VanLeeuwen said his understanding is that council was amalgamating some of its old debt for this.
Snarr said it was an opportune time to restructure the debt to get a better rate.
VanLeeuwen agreed it is best to get the best rate and move forward.
In his notes, Snarr commented that in July council approved the expansion of the Elora waste water plant and modifications to the Clyde Street Pumping Station to the lowest responsible and responsive bidder; Wellington Construction Contractors Inc. of Palmerston, in the amount of $21,359,000 inclusive of contingency allowances and excluding the HST.
The total estimated cost of the project is $23,707,000 inclusive of estimated engineering, costs incurred to date, and the non-refundable portion of the HST.
The growth related portion of the project costs (79.3%) are funded from debt, the principal and interest payments of which are recovered from development charges, and the non-growth portion (20.7%) is funded from a combination of grants and sanitary sewer reserves.
Of the total debt funding for this project in the amount of $18,799,650, $10,000,000 is a loan from the Federation of Canada – Green Municipal Fund (FCMGMF), and the balance of $8,799,650 is other debt.
FCM announced changes to the Green Municipal Fund early in 2010 that allows municipalities to apply for funding of Waste Water Treatment Plant projects that will improve effluent quality.
