City prepares to borrow millions for fire hall expansion

By on August 10, 2017
City council file photo.

Merritt city council has directed staff to prepare a bylaw that will authorize borrowing of up to $2.2 million over the next 25 years to expand the fire hall.

Council voted 5-2 in favour of drafting a bylaw that will allow the city to borrow the full estimated cost of the project over the maximum quarter-century timeframe. This course of action includes going to the alternative approval process to gain the support of the local electorate.

Councillors Mike Goetz and Dave Baker voted against the motion.

At the meeting, Coun. Linda Brown questioned borrowing the full amount given the funds the city has in reserves.

Director of finance Sheila Thiessen told council the city has about $2 million in non-designated reserves. She said the bylaw would enables borrowing the full amount of the project cost, but the city doesn’t have to borrow it all.

“We do not have to borrow the full amount if the project comes in at a lesser amount or we find other sources of funding, but that bylaw would authorize the full amount,” said Thiessen. “We can borrow less if we want to at the time.”

Thiessen advised against using surplus funds as those dollars will be depleted over the next few years given the coming change in tax rate for the Tolko mill that shut down last December and tax exemptions coming for the Merritt Green Energy Project.

“We’ll have to use some of our surplus to smooth the tax impact of those,” said Thiessen, adding that council could consider designating surplus funds at the end of the year when the exact amount of city surpluses will be known.

Coun. Goetz said  he would oppose the motion because he believes the project should be put off until the impact of the changing Tolko tax base is known.

Concept art of the $2.2 million fire hall expansion project. Photo submitted

Directing staff to draw up a loan authorization bylaw is the first step in the process of gaining elector approval for the project, which is required given the large amount the city plans to borrow from the Municipal Finance Authority.

Council will need to give three readings to the bylaw before holding the alternative approval process.

Anytime a municipality plans to incur debt for more than five years — as would be the case for the fire hall expansion — a city is required to put the project to a community referendum or alternate approval process.

Unlike a referendum, in an alternate approval process only those who are against the project are invited to vote.

Should the city collect “no” signatures totalling more than 10 per cent of the local electorate, the lending required to finance the fire hall expansion would not move forward. With an estimated 5,400 people eligible to cast a vote in the municipal elections in 2014, about 540 people would have to object for the bylaw permitting the lending to be defeated.

If the lending is approved, the city would finance its debt at a rate of about $130,000 over 25 years or $154,000 over 20 years starting in 2018, according to a staff report to council. That rate would equate to approximately 2 per cent of the city tax revenue.

The report also stated there are no adequate funds available in city reserve funds and no grant funding available for the project.

The fire hall expansion project would add living quarters for the Work Experience Program firefighters stationed in Merritt, as well as providing conference and training spaces, a new decontamination room and increased storage space.

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