Minto council revises capital budget, approves borrowing $5 million for projects

MINTO – Council here has revised the town’s 2021 capital budget and authorized the treasurer to proceed with debenture financing of about $5.2 million.

Council adopted the 2021 budget in December, 2020. At that time, some grant funding applications and final pricing of certain capital projects were uncertain, notes a report from treasurer Gordon Duff.

“When we set our capital budget it was based on what we knew at the time, and what we hoped too,” explained Duff at the Sept. 19 council meeting.

“One of the things that didn’t work out is we had hoped we would get funding for the last Connecting Link, which is Arthur Street in Harriston, west of the lights to the former town limits. That one did not come true, so we’re backing that out of the budget.”.

The Connecting Link work would have been 90 per cent provincially funded, but the move still freed up “a little bit of money,” Duff noted. Because the project did not go ahead, the town was able to direct a $70,000 Ontario Community Infrastructure Fund grant to the Allan Street East reconstruction project in Clifford.

In August, council approved a budget amendment for the Lions Park Pedestrian Bridge rehabilitation project, with the intent of funding the $80,000 project from roads reserves.

Duff pointed out staff have since completed a review of the costing of high-priority major capital projects.

“While the Town of Minto continues to build reserve balances, funding of several major projects through reserve and reserve funds would limit the town’s flexibility in the funding of future capital initiatives. The cost of borrowing remains very affordable with the Bank of Canada Prime Rate at approximately 2.45%,” he states in the report.

In order to take advantage of low rates and to ensure sufficient funds are available to begin construction in the spring of 2022, the report states that issuing debentures through the County of Wellington is the most efficient method of financing the project.

Planned renovations and expansion of the Palmerston and District Community Centre are also impacting the town’s financing needs. The town was successful in a grant application under the Investing in Canada Infrastructure Program: Community, Culture and Recreation stream.

Total project costs are estimated at $2,415,000 with the federal government contributing $966,000, the province $795,500 and the Town of Minto $653,500.

“Borrowing in the amount of $650,000 over a 10-year term is recommended to finance the Town of Minto’s share,” the report states.

The report also indicates the clarifier at the Palmerston Sewage Treatment Plant needs to be replaced, at an estimated $2.9 million cost.

“We’re thinking we will borrow about $2.5 million,” with the balance to be funded from wastewater capital reserves, Duff explained.

Another budget revision facilitates the completion of restoration work on Minto 12th Line which has been under way for the past two years. A culvert has been replaced and urgent road repairs have been completed.

The final step is to complete the milling and paving of the section of the road which is being replaced. The estimated costs for work to be done in 2022 is $650,000. There is $150,000 in previously-approved budget amounts and Duff recommended the remaining $500,000 be debentured over 10 years.

Duff told council the town is working with the County of Wellington on moving ahead with planned work on White’s Road (Wellington Road 5).

“Whites Road is an important artery in the Town of Minto with a hospital, long-term care home and residences located on the stretch near the entrance to Palmerston. It is also a major thoroughfare for business and residential traffic,” Duff explains in the report.

Although it is a county road, the town is responsible for underground services and a portion of the watermain needs repairs.

“The timing and scope of this work is driven by a major expansion of the long-term care and retirement facility, which requires upgrades to the services for this property,” the report states.

The total estimated cost of this project is $3,700,000 with the County of Wellington’s share estimated at $1,745,000 and the Town of Minto’s share at $1,955,000.

The report indicates the cost for the town would be financed by $445,000 from development charges with the remaining $1,510,000 to be borrowed. The road work of $575,000 would be debentured over 10 years with the water and wastewater components of $580,000 and $355,000 to be debentured over 20 years.

Councillor Mark MacKenzie asked how the additional borrowing would impact the town’s total debt load.

“If you look at what we’re going to pay down and new borrowing it will bring us up again to about $10.8 million in total,” said Duff. “It’s well within our annual debt repayment limit.”

“So the impact on tax assessment, it’s not going to increase that much?” asked MacKenzie.

“It will have some impact but, again, I think all these projects are very necessary,” said Duff.

“We looked at various options for borrowing – no one can perfectly read interest rates, but they are historically low.”

He added, “As we all know there’s a lot of inflationary pressures that seem to be building up in the world economy … and we figure interest rates are only going to go up in the next year, certainly not down.”

“Over the years we’ve had this debate and I really like the way we’ve positioned ourselves in borrowing,” said Mayor George Bridge.

“Like anything else you do, you pay money off, but then you need a new car and then you have to go back into debt again.”

The mayor added, “We’re taking advantage at the right time I believe. I do believe what Gord was saying about interest rates. I think we’re getting near the lowest we’re going to see.

“These are all good projects and I think we’ve hit the right time to do them.”

Councillor Jean Anderson wondered how borrowing would impact the town’s ability to afford infrastructure needed to support future growth.

“We know we have lots of developments happening and proposed to be happening down the road. What happens when we need to increase that infrastructure?” she asked.

“We’ve been working on a servicing strategy for a few months now, as well as a long-term planning strategy,” said CAO Derrick Thomson.

“We’re going to combine it all together and we’re going to show you where our future development is, what future infrastructure we need and we’ll come out with a financial forecast and a financial plan to help support that.”

Thompson added the information should be ready for council “hopefully by the end of the year.”

Councillor Ron Elliott pointed out development charges are intended to help cover the cost of growth.

“As we put 130 houses in Harriston, we get 130 developmental fees, which helps your plan Mr. Thomson,” he noted.

Duff noted growth means new revenue streams, as well as expenses.

“Yes, our costs go up, but in the long term our revenue goes up too,” he said, noting new houses generate additional tax revenues and new customers for the water and wastewater systems.

Duff noted it’s always a challenge to balance the repayment of infrastructure debt between current and future users.

“You’re doing the tightrope. Do you burden all of today’s taxpayers with these costs or do you divide it over the next generation who will benefit?” he said.

“It’s more of an art than a science.”

A motion to receive the report, amend the 2021 budget bylaw and authorize debenture financing of $5,160,000 was approved unopposed.