Less than three months after approving a 7.5% tax increase, Guelph-Eramosa council has agreed to borrow over $3.1 million to help cover three capital projects not included in the original 2012 budget.
The expansion of the Brucedale municipal office, reconstruction of Jones Baseline and paving of a portion of Sideroad 20 are expected to total more than $4.24 million.
The original tax levy passed in February was $4.72 million. And while the May 7 budget amendment will not affect taxes this year, it could over the next decade, as the township repays the $3,130,000 (plus 2.94% interest) it plans to borrow from Infrastructure Ontario, a crown corporation owned by the province.
“Borrowing is a deferred tax; that’s what it is,” Mayor Chris White acknowledged to reporters after the meeting. “But this made sense.”
The mayor and councillors offered several explanations why those three capital expenditures and the $3.1 million in debentures were proceeding now and not as part of the original budget:
– a lower interest rate;
– up to date roads information made available to council;
– the township completely paying off several other debts this year; and
– increased availability of construction companies now that government infrastructure funds have all but dried up.
White acknowledged councillors have been considering the three projects for some time but they were unsure about the debentures.
“Some of it was just hesitation … [Borrowing is] not something we do every day,” he said.
White told the Advertiser the budget amendment will save money over time and will not have a negative impact on the township’s overall finances.
“We’re not piling debt on top of debt,” he said, adding Guelph-Eramosa’s debt rate is “very low” compared to other municipalities in Wellington County.
Councillor Doug Breen said the budget amendment strikes a good balance between “getting caught up and not spreading ourselves too thin.” He added the township had considered a similar move several times in the past, but the timing was not right.
“This is the responsible and intelligent thing to do going forward,” Breen said, noting all three projects would have been much more expensive a few years ago. “Timing is everything.”
Councillor John Scott said council is smart to take advantage of what he called “low-cost funding” in the form of a low interest rate.
“It was like a light bulb went off,” Scott said after the meeting, describing council’s realization that now was the time to proceed with the three projects.
Only one township resident was present on May 7 for the discussion on the budget amendment.
The meeting, including council’s intent to amend the budget for the three projects, was advertised in two local Newspapers and on the township’s website. Those ads, however, did not include any information about the proposed debentures.
When it was suggested more residents might have attended the meeting had they known about the $3.1 million in new debt, White and township chief administrative officer Janice Sheppard said the township met all requirements for notice. Both added the complete report presented at the meeting was on the township website prior to the meeting.
Jones Baseline
The township had originally planned to reconstruct a portion of Jones Baseline this year – from County Road 124 to Mill Road – at a cost of about $1.4 million, which was included in the original budget. The remainder of the work to complete the northern half of Jones Baseline was to be done in two additional sections by 2016.
With the amendment on Monday, the township will reconstruct the entire northern half of Jones Baseline – from County Road 124 to County Road 22 – in 2012, at a total cost of $2.2 million, which will be completely covered by a debenture.
“We feel we make some great gains by doing it this way,” said public works manager Mark Robertson.
White said the move could save $500,000 while also freeing up the township in future years to work on other road projects.
The move essentially cancels the $700,000 transfer of reserves included in the 2012 budget, and most of the other half of the original funding ($700,000 in gas tax funds) will essentially be used instead for Sideroad 20.
Sideroad 20
Paving Sideroad 20 from Jones Baseline to 5th Line was not included in the original 2012 budget, finance manage Linda Cheyne said, “as the original thought of funding Jones Baseline would consume all the capital funds for 2012.”
The total cost to pave the gravel road, which Robertson said is an old corduroy road, is estimated at $981,180. The township plans to use staff labour and equipment to cover $294,354 of the cost, with the remaining $686,826 coming from gas tax reserves.
Robertson estimated most of the work on Jones Baseline and Sideroad 20 should be completed by this fall, with a final layer of asphalt applied next spring.
Office addition
The 3,850 square foot addition is expected to cost about $1,062,000 with $930,000 coming from a debenture, $76,700 from capital reserves and $55,300 from development charges.
Cheyne and White said the addition will eliminate the need for the trailer outside the office that houses some staff members, and it will also address accessibility issues and alleviate some of the crowding inside the current office.
“We’re not building a Taj Mahal, we’re just building an efficient office space for the people that work here,” White said when asked about the expansion.
The addition has been discussed for years, and White acknowledged the move was necessitated in part by a growing staff, particularly four new employees hired after the township took over its own water services, and others required to meet regulations.
The mayor said it is always a difficult decision to put “municipal infrastructure” ahead of other needs such as roads, but the office addition is a necessity.
The budget amendment nearly doubles the township’s expected long-term debt repayment for 2013 (from $350,706 to $675,561). The two new debentures are expected to be paid off by 2022.
