City council will support the Buffalo Pound Water Treatment Corporation’s (BPWTC) pursuit of a $60-million loan for its plant renewal project, an initiative that will extend the life of the aging building.
During the Feb. 16 executive committee meeting, council voted unanimously to authorize the corporation to start financing negotiations with a lender — to a maximum of $60 million — to address the project’s expenses. Council also authorized finance director Brian Acker to negotiate any guarantee the municipality needs to offer with lenders to assist with the borrowing.
This recommendation must be approved at a future council meeting for it to become official.
Background
It has been nearly 30 years since the building was last upgraded — it dates to the 1950s — so the plant renewal project will ensure the water treatment plant’s long-term viability and fulfill its mandate to provide safe and clean water, a city council report explained.
The project is expected to cost $252.8 million. The corporation has applied for $163.4 million in federal funding, leaving $60 million still to be acquired.
Since the City of Moose Jaw has a 26-per-cent ownership stake at Buffalo Pound, the city would have to guarantee — or back-stop — $15.6 million of the borrowing and temporarily add it to the debt levels. The municipality will have used $70.2 million of its $95-milion debt space by back-stopping the project, the report added.
Council discussion
Buffalo Pound borrowed $45 million a few years ago for a project and a “good portion” of that funding remains, so that can also go to this project, Acker told council.
“Although it (the $15.6 million) is Buffalo Pound’s debt, it does show on our consolidated financial statements as if it was the City of Moose Jaw’s,” he added. “So you will see it on future financial statements as we move forward.”
The next step is to ask financial institutions to provide BPWTC with quotes related to borrowing, which would allow the corporation to move forward, explained Acker. One of the main components of borrowing is it will be repaid through the water rates. This means Moose Jaw would be responsible for 15 per cent and the City of Regina would be responsible for 85 per cent.
“We anticipate very good borrowing rates, something south of three per cent, which is very good for longer-term borrowing,” he said, adding city administration will come back to council to ask for approval once the borrowing quotes have been provided.
The report noted that BPWTC had budgeted $6.6 million for advisory fees, which caught the attention interest of Coun. Crystal Froese.
Ryan Johnson, general manager of the Buffalo Pound Water Treatment Plant, explained those fees were added since the plant doesn’t have employees with experience in projects of this size. The corporation hired a third-party professional engineering firm to support the initiative. It also hired a fairness advisor to ensure the corporation does everything above board and can’t be challenged legally.
The funding should be in place by June 30, while the design-build team will provide a guaranteed maximum price by Sept. 30, he continued. Mobilization should occur by late December, with demolition and construction to start in January or February 2022.
The Government of Canada knows the schedule for this project, so even with delays, BPWTC has 10 years to build this structure, Johnson told Coun. Jamey Logan. However, the federal government still wants to know where its money is going, so the corporation has until March 31 to have its share in place.
Johnson added that BPWTC could live within its budget.
“I’m happy to hear that,” replied Logan, although he was concerned that the price of steel had increased by 60 per cent in the last six months. Yet, he was still pleased that the federal funding had no expiry date.
“This project is obviously essential for our water security … ,” said Froese. “With the fluctuations of prices, everything can get more expensive moving forward.”
The next executive committee meeting is on March 8.
