The Buffalo Pound Water Treatment Plant renewal project will cost an additional $55 million, of which the City of Moose Jaw’s portion will be $14.3 million. Council authorized city administration to begin looking for favourable interest rates before the money is required.
“As you know, this is a once-in-a-generation plant renewal project,” city manager Jim Puffalt said. “We borrowed $60 million in 2021, and we found out earlier this year that we need an additional $55 million for a variety of reasons, including supply chain changes to the project.”
The funds will not be needed until 2024, but Puffalt said that recent uncertainty regarding interest rates made it prudent to try and lock in a rate of less than six percent while it is still possible.
“We want to get it in front of council and start talking to financial institutions about borrowing with a maximum of 5.8 per cent. … From the City of Moose Jaw’s point of view, we may have opportunity to fund internally with reserves. As you know, our long-term investment fund (has a target) interest rate growth of six per cent.”
If the city can lock in a lower interest rate now, it will be in a better financial position in 2024 when the money is due.
The upgrades to the plant will increase its production from 205 million litres per day to 250 million litres per day — an essential renovation given that the cities of Regina and Moose Jaw, which co-own the plant, are both expected to grow in the next few years. Other major improvements will also be made.
The project’s details are available at www.buffalopoundwtp.ca/22-news/89-plant-renewal-project.
Uneasiness was palpable in the council chambers as Councillor Crystal Froese asked Puffalt what the impact on the city’s debt limit would be.
“It would show up in our debt limit as funds to be expended,” Puffalt confirmed. If approved, the city will be at a debt load of approximately $91 million — out of $95 million.
We don’t want to use borrowing unless we absolutely have to, Puffalt went on, but for a project this size, there’s no other way.
The money would be borrowed by the treatment plant itself, based on the joint ownership of the plant. The City of Regina owns 76 per cent, while Moose Jaw owns 24 per cent.
The repayment, on the other hand, is based on consumption, and would come out of the utility fees collected by the plant. Regina uses 86 per cent of production — Moose Jaw uses 14 per cent, meaning repayment will be easier than it first appears.
Still, it was a sober executive committee that voted to authorize Brian Acker, Director of Financial Services, to explore the necessary financing.
If Acker cannot find an interest rate at or below 5.8 per cent, city administration will return to council for another discussion.
“We have to improve the facilities at the Buffalo Pound Water Treatment Plant,” Mayor Clive Tolley told media after adjournment. “This is an absolutely necessary project. … It means borrowing some money, but we’ll be creative in the way we borrow that money and try and take advantage of the fact that we have good assets invested, and we’re doing the best we can with the money we have.”
The next meeting of city council is August 22.
