The City of St. Albert will borrow $15.9 million to fund the third stage of Ray Gibbon Drive after council passed second and third readings of a borrowing bylaw Monday evening.
With this financing decision now in place, construction on the next leg of the bypass could begin as early as this fall, said city manager Bill Holtby.
"Worst case would be they'd start construction in spring of 2012," he said.
City council passed first reading of the borrowing bylaw in July prior to its five-week summer hiatus. This set in motion a public engagement process that included advertising the potential bylaw and opening the door for anyone in opposition to file a petition. No opposition emerged, so council passed second and third readings by a 6-1 vote.
The section of road will extend the existing Ray Gibbon Drive north from Giroux Road to Villeneuve Road. It is projected to cost about $17.2 million. The city has $1.3 million in place, so it was looking to borrow the balance of $15.9 million.
The time is right to build because interest rates and construction costs are both very favourable now, said Coun. Roger Lemieux.
He also said the next stage is important to alleviate heavy commuter traffic on Hogan Road.
The city is paying for the land and road construction with the understanding that the province will repay any amounts associated with building to a provincial highway standard. Lemieux was confident that the province will continue with this commitment.
"We will be reimbursed by the provincial government," he said.
To date, the city has been refunded about $25 million from the province but Mayor Nolan Crouse estimates the province still owes $1.2 million.
Crouse acknowledged that the government's commitment letters aren't legally binding but he thinks the city should still move forward because costs will rise in the future.
"The letters aren't contracts. They're weak letters," Crouse said. "We tried to get them to sign a contract and they wouldn't. That's the weakness of this."
On the other hand, the province has provided $25 million to date and bought a quarter section of land for a future interchange north of Villeneuve Road earlier this year.
"I'm guessing they're not walking away from this road," Crouse said.
Only Coun. Cam MacKay voted against the borrowing. He said he was wary of taking this step now because it's based on deals with provincial politicians at a time when the ruling Tories are in the midst of a leadership race and a provincial election is likely to occur in the near future.
"I just wonder why we wouldn't wait until after we know what kind of government is going to be in place before doing this," MacKay said.
Non-traditional borrowing
City administration wants to borrow from a bank, which is a non-traditional source of funds for a municipality. The city's financial officers feel this is favourable in this case because the arrival of provincial reimbursement money will allow for the early retirement of the debt with fewer penalties than if the city borrowed from the Alberta Capital Finance Authority, which is the usual source of debt financing for municipalities.
The new debt will cost about $1.06 million a year to service and will put the city at about 40 per cent of its debt ceiling.
The city owed $66.2 million as of the end of 2010 and has $755,000 worth of debt payments coming off its books in 2011 — $646,000 for the RCMP detachment and $109,000 for an energy savings program.
Ray Gibbon Drive will eventually extend north beyond Villeneuve Road and connect to Highway 2 north of St. Albert.
The province is working on preliminary planning on this future alignment but doesn't have land in place or a target date, said Alberta Transportation spokesman Martin Dupuis.
The land the province bought earlier this year is for an interchange at Villeneuve Road and Ray Gibbon Drive, he said.
