There is a high cost for getting infrastructure funds – and it is going to cost this town nearly $3-million.
It is a first for Minto, and possibly for any local municipality. Town council has amended its current budget long after its was passed back in May. The reason is a series of infrastructure grants which, on the surface, are a good thing.
But now the town must come up with its one-third share for those projects that receive two-thirds funding from the provincial and federal governments. While it might not amount to a change to this year’s tax bill, it will affect future tax bills.
Treasurer Gord Duff said projected capital expenses for Minto are now $6.5-million, new debt of almost $3-million and grants of $2.7 million. Deputy-Mayor Judy Dirksen noted council now has more information than it did when it set its budget earlier in the year.
Duff said “Things have changed quite a bit since the passing of the budget.”
In a memo, Duff explained the 2009 tax levy was approved in May, but at that time several grant submissions were still under consideration. “Now that we are moving forward in 2009 and 2010, these projects and related financing require approval.”
He said, “This is something we’ve never done before, but because of all the grant programs this year, we’ve had to adjust our budget.” He noted some grant applications were for projects not in this year’s budget, while others were.
“Now we have a clearer idea of which projects we have, and which ones we don’t,” Duff said. “Since this is September, and we’ve already mailed out our tax bills, we can’t do anything that affects the tax levy. It will remain exactly the same.”
The town will have to raise $3,339,835.
What will change, Duff said, is how that money will be spent. He cited various capital projects, reserve fund transfers and Minto’s debt load.
He mentioned the Arthur Street bridge, on which the municipality has spent about $50,000 so far, primarily for design work.
As for the Connecting Link work on Elora Street, Duff said about $300,000 was included in the 2009 budget, but now that work will not happen until next year.
Another $400,000 was set aside to work on Ayton Road, but, “We’re not going to work on that road this year,” Duff said, adding other road projects will be done.
The big changes come once council starts dealing with the water and sewer department.
Duff explained Minto applied for the Build Canada Fund grant – which it received. It is two-thirds funding for the $1.9-million in eligible expenses, plus there are other expenses that are not eligible for the grant funding.
“Since this is September, it’s probably going to be November before we physically have that money in our hands,” he said. “I’m trying to borrow enough money to see us through until spring.”
Because of those projects, Duff said council will see the amount in unexpected capital will appear very high on Dec. 31, but “a lot of that money will be spent in early 2010.”
As for the Harriston sewer project, Duff tried to highlight the portions of the project that will be undertaken this year. A number of items will still need to be done in 2010. The bulk of the borrowing will be to deal with the sewer project, he explained.
He added design work on a new well for Palmerston is also being deferred.
In the area of recreation, the town received infrastructure funding for two-thirds, or $187,000. “That we are going to finance from reserves.”
The other major impact is the receipt of a rural economic development grant. He said components of that project, will be done this year at the CN property and Lions Park.
Then, he said, there is the Building Canada Fund grant received for the property’s rehabilitation. It’s a two-thirds grant. Of that $950,000 project, “I’m proposing we finance our share, the $315,000.”
On the streetscape side, Duff said, he had not planned to propose borrowing for that, however, “the finances have been really tight lately.”
He proposed borrowing about $300,000 for the hard costs such as interlocking brickwork, planters, and items that will have a lasting benefit to the community.
“It does increase the overall cost of things, but it may be a more realistic way of handling the finances.”
He added, “At the end of the year, we’re going to have over $3-million in outstanding capital.”
He said all the change is due to infrastructure projects.
As he mentioned at past meetings, Duff said having the grants are a good thing, but the challenge is for the municipality to come up with its contributions for the projects.
Dirksen said the municipality has to look at it as an opportunity as well, because those extra dollars do not come along frequently. She did not anticipate many similar funding opportunities in the future.
“But that’s okay, because we’ll be paying this back … and in the meantime, we’ll have these projects completed.”
Duff compared it to the auto industry, where the town is taking on a lot of projects it had planned over the next five years, and doing them in a much shorter period. It does mean, the town will have to cut back on spending in the years ahead, he added.
Councillor Rick Hembly said at least the town will have a sound infrastructure. “I know there’s always work to be done, but we’re squeezing a five- to ten-year plan into a two-year plan because the dollars are available to us.”
When councillor Wayne Martin asked for a ballpark estimate of Minto’s debt load, Duff said it is between $12- to $13-million.
He said while the town is adding about $3-million to its debt load, about $2.3-million of that is related to sewers, which, in turn, will affect future water and sewer rates.
Martin said, “With those numbers, we are getting really tight.”
Duff agreed. However, he also said if there was a situation that required the town to borrow another $5-million, “We could … but we sure wouldn’t want to do it.”
Martin believes it was a good thing that council started talking about the impact the budget early – especially since it entering into its final budget deliberations for this term of office.
“You’re correct, because we’re setting a lot of the 2010 budget here,” Duff said.
Martin believes the upper levels of government need to understand the situation that the two-thirds grant funding is placing on municipalities.
Dirksen said all the projects have a lasting value.
Councillor David Turton considered the major factor is the money is available now.
Turton asked if Minto is unique in this situation.
Duff said “Minto is unique in that it has replaced three water towers in the past few years.”
He added that before the upper levels became involved, Minto had already invested heavily in its infrastructure. However, Duff said many municipalities are happy to have the funding, but raising a local share can be difficult -especially with short timelines.
Councillor Tammy Reiner noted that money being spent on water and sewers “almost has to be spent anyway because the new regulations. We’re going to have to spend it now, or as the new regulations are passed.”
Once council agreed to the revision, Duff said there are some options to raise the additional $3 million.
He said Canada Mortgage and Housing is lending directly to municipalities, which it has never done before.
“The interest rates are very good at 3.98% over 15 years. Nobody else can touch that.”
The interest cost over 15 years for that is $791,000
His recommendation was to go to the CMHC to borrow for the sewer project, and to borrow from Wellington County for the other two projects.
Dirksen explained that the rates are locked in for the full length of the loan. She said she would be more worried if Minto had to renegotiate the loan after five years.
Council later voted to borrow $2,344,668 from the CMHC municipal lending program for a 15-year period.
Those funds would be used to finance the Harriston sewage upgrades.
Council then passed a motion to borrow $615,000 over a 10-year period to be used to finance the Palmerston CN land rehabilitation, and streetscape revitalization project.
