The City of Nelson is trying to figure out whether to borrow millions of dollars now for key projects waiting on grant approvals from the B.C. or federal governments.
During a capital budget working session Friday, there was a long discussion by council about whether the city should borrow a big chunk of cash now and lock in a low interest rate. It would then put the cash in some investment vehicle until it’s needed.
One of those projects is upgrading the storm sewers in the city, which is expected to cost about $9 million through 2026 and the city will have to borrow about $3 million if its grant is successful.
The other projects waiting in the wings that would require borrowing are the $9 million Civic Center upgrade and upgrading the sewage treatment plant, which doesn’t have a cost yet and and master plan is in progress. There is the nearly $2 million Nelson Transit Exchange (a federal-provincial grant application is in progress) but the financing for the portion of that would be held by BC Transit and added over 10 years to the city’s annual operating agreement.
Coun. Rik Logtenburg questioned whether the city could borrow now in anticipation of getting a grant from senior governments. Chief Financial Officer Colin McClure answered that it’s been done before when the city was dealing with Nelson Hydro.
It’s projected the city’s reserve fund for capital projects, which stands at about $1.8 million, will be drawn down to $1.4 million. There are $2.6 million in projects this year but only about $2.2 million in contributions to the reserve. Part of that is due to a more conservative projection of parking revenue – it makes up the bulk of the reserve revenue – given the ongoing pandemic.
When looking at borrowing, Mayor John Dooley wanted to make sure reserve funds are not put in danger because it’s what has made the city “resilient” and financially stable in recent years.
A report on financing will come to an upcoming council meeting. The city would not likely approach the Municipal Finance Authority of BC about a loan until the fall.
