New Westminster's finance director is comfortable with the city's plan to borrow millions of dollars for the civic centre project.
New Westminster city council announced in April that the city would proceed with construction of an office tower above the future civic centre and would need to borrow up to $59 million for the project to proceed. The decision came after the Uptown Property Group pulled out of the project.
Gary Holowatiuk, the city's director of finance and information technology, said the city will have a "real asset" with the money invested in the project because it will have a Class A office building that it will be able to sell or lease to generate funds. In addition, he said the office component is expected to generate more than $660,000 annually in tax revenues.
The City of New Westminster has launched an "alternative approval process" in which electors who are opposed to the loan authorization bylaw must sign forms and submit them to city hall by 4: 30 p.m. on Tuesday, Aug. 7. Residents who support the bylaw don't have to do anything.
"It's borrowing up to $59 million," Holowatiuk said. "The loan authorization bylaw doesn't commit us to anything. We don't have to borrow anything if we don't want to."
Holowatiuk said the Municipal Finance Authority of B.C. provides short-term funds at "excellent rates" of about 1.7 per cent annually for terms of less than five years as municipalities are building their capital projects. Once the projects are complete and the actual costs are known, a municipality can convert the short-term loan to a long-term loan - or can just repay the short-term loan and convert it to long-term debt.
According to Holowatiuk, the city has undertaken alternate approval processes in the past for projects like the police building on Columbia Street, the Moody Park Outdoor Pool, Westminster Pier Park and the Centre for Community Achievement (which never came to be). He said the city's past practice for alternative approval processes has been to adhere to the requirements of the Community Charter, regardless of when the city begins the process.
"It has to do with trying to get the authority to borrow as soon as possible, primarily because it is usually a fairly lengthy process," he said about borrowing funds from the B.C.'s municipal finance authority. "You have all your ducks in order."
Holowatiuk said it's important to complete the process as early as possible to secure the cash flow for the city's 2012 capital program.
"It can be a very lengthy process, depending on the nature of the loan authorization bylaw," he said. "We move forward as soon as council supports the process."
The City of New Westminster is able to proceed with adopting the loan authorization bylaw unless at least 10 per cent of the estimated number of electors in the city (4,528 people) sign an alternative approval process elector response form. If there is sufficient petitions to oppose the loan authorization bylaw, Holowatiuk said the then have to go to to get support to borrow the funds.
"The loan authorization bylaw authorizes the city to borrow up to $59 million over the next three years," Holowatiuk wrote in an email to The Record. "Initially we will use short-term borrowing each year as needed to meet the cash-flow requirements of the various capital projects. When the office tower is sold, we will repay the short-term debt to the extent possible and convert the balance to long-term debt with the municipal finance authority that the city will repay over a 20year period."
The City of New Westminster had agreed to partner with the Uptown Property Group on the multi-use civic facility project, but the company later decided against building a 100,000square-foot office tower above the city's 80,000-to 85,000square-foot civic facility. The city decided to proceed with the office tower on its own.
The total budget for the project is $94 million, which includes $41.5 million for the civic centre, $12.5 million for the parking structure (to be used by the office tower and the civic facility), and $40 million for the office development. The city will use $43 million in casino money known as "development assistance compensation" for the project.
According to a staff report, the city's plan is to borrow up to $59 million from the municipal finance authority: up to $11 million for the city's costs related to the multi-use civic facility and parking structure; up to $33 million related to traditional capital programs; and up to $15 million to interim finance the costs related to development assistance compensation funding until the city receives those funds.
"We will be borrowing using short-term financing initially to finance various capital projects, including part of the (multi-use civic facility)," Holowatiuk said.
The city's plan is to borrow money in the short term to finance the project until it's built, and then repay the loan as development assistance compensation and other resources (such as the proceeds of the sale of the office development) become available. Once the project is complete, the city would need to decide how much of the outstanding short-term borrowing from the Municipal Finance Authority that it wants to convert to longterm debt.
A staff report stated that the Municipal Finance Authority's capital financing program provides municipalities with the ability to debt finance capital projects that are considered to be core services for their municipalities.
Instead of funding projects already included in the five-year capital program through reserves - facility maintenance ($10 million), road maintenance ($15 million) and park development ($8 million) that total $33 million - the city is proposing to pay for these capital programs through funds borrowed from the Municipal Finance Authority. The $33 million from reserves would then be used to help fund the office development.
New Westminster city council decided to proceed with construction of the office tower because it believes Class A office space is a critical component of downtown revitalization efforts.
The city has stated it will result in increased revenue from property taxes (about $50 million over 50 years), create an activity precinct in the downtown, bring new customers for new and existing retail in the downtown, and create up to 250 new jobs in the downtown.
The civic centre will include a 350-seat theatre with flexible seating to accommodate a variety of productions, conference and meeting space, art studios, an art gallery, tourist information centre and the city's museum and archives, and the Canadian Lacrosse Hall of Fame.