The city manager’s proposed approach to pay for capital items related to growth received an endorsement from the private sector Monday, but some councillors are still skeptical about how exactly it will work.
A report compiled by Ernst & Young examining the proposed capital growth fund found no major issues with its proposed function, going so far as to even call it “unique” amongst municipalities dealing with similar problems.
“I do believe it is fairly innovative and does put you in a position with the approach and strategy to lay that all out,” said Ernst & Young partner Chris Lavin.
The brainchild of city manager Patrick Draper, the capital growth fund would see the city use 15 per cent of its Municipal Sustainability Initiative (MSI) money, as well as borrowing from its cash flow to create a $40-million pool over five years to fund construction of growth capital projects.
Draper had noted when the idea was first presented that maintenance of existing infrastructure will continue to consume more of the city’s capital budget each year, leaving little money for new projects.
But some councillors at the standing committee on finance meeting Monday night were still reserved in their support of it. Some were unsure of exactly where the money would come from and others had fears future councils could change different parts of it, such as how quickly the city pays itself back.
Mayor Nolan Crouse and other members of council were under the impression the city would borrow from its reserve accounts to grow the fund. But Draper was insistent none of the money would come from any of the city’s reserve accounts. The idea is to borrow the money from the city’s internal cash flow, which totals approximately $120 million annually.
“That is coming in each year in receipts from property taxes, from grants from the provincial government. That’s where the lion’s share of the cash comes from,” Draper said. “The intent is not to borrow from reserves. The reserve money would be protected.”
Crouse said he felt better after that was explained, but wants to make sure this idea is well thought out before it gets a full endorsement.
“I’m OK nudging this forward but it’s going to be done slowly and thoroughly,” Crouse said, adding he wants to make sure the “arithmetic works.”
Previous discussions of what money to use to build up the fund have revealed it would cost the city — and taxpayers — more to borrow externally than to borrow from itself. By using internal resources, the cost to the taxpayer would amount to a .3 per cent tax increase to repay what was borrowed, compared to .7 per cent if the city borrowed externally. The city would save $650,000 by using its own resources.
Coun. Wes Brodhead said he wanted to see safeguards put in place to make sure future councils don’t change the city’s repayment schedule. Draper said administration would do the best it could.
“We can enact agreements over how much money has been borrowed and the repayment schedule to make sure they are repaid over the life of the projects,” Draper said. “Ultimately we can’t enact legislation the way a province could, but through policies and bylaws we can do the best job we can.”
Despite individual reservations, council voted unanimously to hold open forums from groups the fund could impact, with the results returned to the committee in mid-January.
The fund will not be in place by the time council reviews the 2013 budget.
