City plans to borrow for $20M pipe
Debt would allow other funds for pool work
Shane Magee
Northern News Services
Wednesday, November 18, 2015
SOMBA K'E/YELLOWKNIFE
The city now intends to borrow $20 million to replace a pipeline that carries its drinking water supply.
Mayor Mark Heyck has previously said the city would start setting aside money in a capital reserve to pay for the project in 2020. |
The eight-kilometre line built in the 1960s runs from the Yellowknife River under Great Slave Lake to Pumphouse No. 1 on 48 Street.
This year, the city raised the expected cost to replace it to $20 million from $15 million as increased construction costs were factored in.
The city budget outlines spending plans by department for next year, capital spending - which includes items such as a splash pad, replacing vehicles or information technology upgrades - and has future capital spending plans. Borrowing for the work was not listed in the city's 2015 long-term debt plan.
Mayor Mark Heyck has previously said the city would start setting aside money in a capital reserve to pay for the project in 2020.
The city has yet to decide whether to renovate the existing pool or build a new one.
However, the city's draft 2016 budget reveals a change in plans. It indicates the city intends to borrow the money because that would "free up the capital funding for other capital projects and (a) new pool in 2020."
The plan shows the city would borrow $1 million in 2019 as preparations to replace the pipeline begin.
Then $19 million would be borrowed in 2020. Interest over the life of the loan is projected to be $8 million.
Jeff Dalley, the city's director of corporate services, said administration made the change so future taxpayers, who would benefit from the pipeline, are the ones paying for it.
"Without putting the burden on taxpayers for the next four or five years in order to build up this fund, administration thought that by borrowing, the burden is not on taxpayers for the next five years to pay for something that's going to happen in 2020," Dalley said.
It would instead put the burden on future taxpayers.
"It could put the burden later on, but later on would be the people that would be benefiting from that pipeline," he said.
Nalini Naidoo, spokesperson for the city, said she expects the topic to be one debated by council over the coming months during the budget approval process.
Borrowing the $20 million could be subject of a plebiscite, although that depends on several factors, said Municipal and Community Affairs deputy minister Tom Williams.
A plebiscite is when all eligible voters in a municipality are asked to answer a question. For instance, on Oct. 19, Hay River voters were asked whether the town can borrow up to $15 million to renovate the community recreation centre.
Borrowing more than $250,000 or more than five per cent of the borrowing capacity of the community can trigger such a vote, Williams said.
The borrowing capacity is a measure of how much debt a municipality can reasonably be expected to be able to take on and repay considering factors such as its tax base and current debt.
In 2016, the city is expected to have $34.2 million in long-term debt to repay, down from a recent peak of $41 million in 2013. The legal borrowing limit in 2018 is projected to be more than $148 million. Five per cent of that would be $7.4 million, well above what the city plans to borrow for the pipeline.
However, Williams said a plebiscite may not be required if the project is deemed necessary for public health.
The city could argue the water supply pipeline counts as necessary, he said.
That's just what happened when the city borrowed $23.9 million in 2013 for the new water treatment plant.
In that case though, the city used most of the money for other infrastructure projects and used money it had saved for the treatment plant.
There's been debate in the past about whether the city should spend money to replace the pipeline or draw its drinking water supply from Yellowknife Bay, which it has done for short durations several times this year.
The city could spend about $5 million to install arsenic treatment filters at the new water plant if it decided to draw full-time from the bay.
The plan does not indicate whether the city anticipates funding from other levels of government.
During the federal election, newly-elected Liberal MP Michael McLeod promised that if elected, he'd advocate for the project to receive federal funds.
