The 335 non-decorative streetlights in Rockwood are set to be converted to LED bulbs.
Guelph Hydro, the company that powers the streetlights in Rockwood, brought a proposal to the township for the conversion.
On June 5 Guelph-Eramosa council told director of public works Harry Niemi to bring a funding agreement to the next council meeting.
Niemi said the cost of the conversion would be about $220,000, which is significantly less than he expected in the 2017 budget. Originally the township planned to debenture the cost.
“Looking at that amount there’s an opportunity to finance it differently as opposed to debenturing for such a small amount,” Niemi said.
He suggested using $100,000 from the $113,000 currently in the Rockwood streetlight reserve and borrowing about $120,000 from the Rockwood Hydro Fund for the balance.
The justification for self-borrowing was that the hydro fund is only making 1.29 per cent in interest with current rates. After borrowing the funds the township will be paying the approximately $120,000 back to the hydro fund plus 1.77% interest over the next five years, resulting in a larger net sum once completely repaid than if the money had never left the fund.
“The hydro fund will make an extra half a point more than it’s making now sitting there and we just restore it,” Mayor Chris White explained.
Councillor David Wolk added, “I think it’s the smart way to go.”
Councillor Mark Bouwmeester questioned why the Rockwood Hydro Fund was earning such low interest rates.
“I’m not an investment guy but I’m sure there’s very safe investments that we could get at least 4% in an income fund type thing,” he said.
Director of finance Linda Cheyne explained there is more risk with the higher-interest options.
“I’m not an investment expert for sure, that’s why we have it through LAS One Fund because I don’t want to come back to council and have bad News that there’s been bad investments,” Cheyne said.
She explained that the risk would be on the interest, not on the principal amount.
“I think as a resident of Rockwood I could live with a little bit of risk for a higher return,” Bouwmeester said. “This fund can be in the seven-figure range.
“These rates of return are I think important. So for this I’d rather not use the hydro fund.”
White agreed it’s important to be aware of the best opportunities for investment.
“I know they’ve loosened some of the municipal financial stuff up recently,” he said. “It would be a decision of this council to decide whether or not they want to take the higher risk for the return.
“We may not, but what’s important is we know what the options are.”
Bouwmeester also asked what the other options were for financing the LED light conversion. Council explained the only other option is to borrow the balance from the bank.
White explained that if the township were to borrow from the bank the hydro fund would continue to make 1.29% interest, but the township would also be paying the 1.77% interest to the bank.
“If we borrow this $100,000 from the hydro fund you’re getting an extra 50% into the hydro fund, not paying all the financing fees and all the other stuff and the debenture,” he said.
“It maintains some of our debenture capacity and it’s really a short debt.”
White added, “For those who want to protect the hydro fund, this is a great way to protect it because you’re putting it into a loan that’s being paid back at a higher rate and in five years you have this, plus the interest.”
Council directed public works to fund the streetlight conversion through reserves and the Rockwood Hydro Fund. Only Bouwmeester was opposed.
Decorative lights
Niemi also updated council on the status of the approximately 161 decorative streetlight bulb conversion.
“The contractor has been exploring options trying to find pricing but pricing is what it is for new decorative fixtures,” he said. “There’s some discussion in the industry that you can retrofit them by pulling out the lights and putting the LED in.”
However, it’s still unclear how long the retrofit will last.
“I may pilot an … isolated area and do three fixtures and see how they function for the next two years because the retrofits you can get for a little bit less, but I don’t want to invest that and find that they’re failing in a couple years so we’ll do that and monitor those three,” he said.
White said council would reassess the cost to retrofit the decorative fixtures in a couple years.
