City council will have to borrow $10 million to fund the high-service pump house replacement project after the provincial government denied a funding application request.
During its Aug. 24 regular meeting, council voted unanimously to award the construction project contract to Westridge Construction Ltd. However, council voted 6-1 to approve the funding of $10 million for the project through long-term borrowing.
Coun. Brian Swanson was opposed.
The project is expected to cost $14.1 million, with $3.9 million coming from the provincial government’s Municipal Economic Enhancement Program (MEEP). The remainder of the money would come from borrowing — to occur sometime in 2021 — and from existing waterworks reserve funds.
Council discussion
The city’s current debt is roughly $56 million, while its limit is $95 million, so it’s a good time to borrow considering rates are at “incredibly low” at 2.5 per cent, said city manager Jim Puffalt. The contractor has agreed to hold the price at roughly the same level for the next eight months.
The contractor has indicated that in January, it will increase the bid price to $12.45 million from $12.17 million, which is a jump of 2.3 per cent, confirmed Bevan Harlton, director of engineering services.
“That is a very fair and justified increase,” he continued, pointing out the additional costs include some labour and keeping concrete warm in the winter. “… It shows to me they are prepared to do the work.”
Mayor Fraser Tolmie wondered how much water the pump house reservoir loses, considering videos have shown major water leaks. Harlton was unable to say but knows the leaks are consistent. He explained that the pump house reservoir holds 27 megalitres (ML) or 57 per cent of the municipality’s water supply, and supplies water to two-thirds of the city.
There will always be losses of water in the system, so this factor is built into financial contracts, said Puffalt. This particular project will save city hall money since it won’t be flushing water down the drain and losing revenue.
City administration has said it would have to defer other projects if council didn’t borrow money for this project, said Swanson. That is an idea he supports, especially since other projects — such as upgrades to hockey change rooms — don’t have the same importance as this pump house reservoir, which services two-thirds of all homes.
“We have fairly significant debt and we should be doing things to reduce the amount of debt we take in,” he added. “We know there are other essential projects waiting in the works for us to incur more debt.”
Project background
City administration had submitted a funding application to the federal government under the Investing in Canada Infrastructure (ICIP) program, but on July 29, the provincial government — acting as an intermediary — informed city hall that the application had been unsuccessful despite being eligible, a council report explained.
The reason for denial was the total number of applications and funding requests exceeded the amount of available funding under this intake.
City administration recommended that council borrow the money to make up for the shortfall in grant funding, but not until 2021. At that time, the finance department would bring forward a report specifying the actual borrowing requirements.
The engineering department identified the high-service pump house as a high priority for replacement due to the poor condition of several components at the building, explained the report.
The condition of several components, including isolation valves, has deteriorated to where replacing or maintaining other components is becoming impossible. Therefore, the report added, replacing the building is more feasible than performing upgrades or retrofits to the existing pump station.
The next regular council meeting is Monday, Sept. 14.
