City of Powell River councillors will consider approving long-term borrowing of $5 million from the municipal finance authority for the consolidated wastewater treatment plant.
At the June 1 committee of the whole meeting, chief financial officer Adam Langenmaier said the purpose of his report to the committee is for council to make the request to qathet Regional District (qRD) to consent to borrowing the additional $5 million on the treatment plant loan.
Langenmaier said in March 2020, the city received the first draw of $10 million on the loan. He said he wants the community to consider taking a draw for 2021. He said the reason for the money being taken on incrementally is to spread out the interest rate risk.
“Since we carry interest rates over a term, the first term is 10 years and after that it is renewed every five years,” said Langenmaier. “If the city was to take on the whole amount of the loan of $27 million, all of our risk would be centralized into one date and that could really impact the net number of years of rate renewals to whatever the interest rates are at that time.
“If you remember back to March 2020, when our first issue was being done, unknown at that time, there was a pandemic brewing that would shake up the financial markets. We were still fortunate to receive a fairly good interest rate. It was within our expectations but there was a risk that it could have gone far more negatively.”
Langenmaier said the strategy of taking out smaller chunks of debt over a long amount of time reduces those risks and smooths volatility in the market.
He said the proposed borrowing is already included in the city’s financial plan. He said the impact on an average single-family dwelling this year is $83, and that is increased from the 2020 levels of $51.
“To put that into perspective, the expected total cost of borrowing for the liquid waste treatment plant on the average single-family dwelling is $149,” said Langenmaier. “We are past the halfway mark, meaning we are not going to be seeing bigger and bigger increases, assuming a stable interest rate environment.”
He said when the borrowing is complete, it will be $149 per year for the life of the loan.”
Langenmaier said the municipal finance authority only has two borrowing issues per year and he wanted to make the fall 2021 window. He said to get the request in, it must flow through qRD and make it to the municipal finance authority by July 31.
The committee gave unanimous consent to send the matter to the city council for adoption at its June 17 meeting.
