Meanwhile, city documents show that council shifted projects needing up to $100 million in additional borrowing to future years after learning about the large price tag for the proposed arena. That includes borrowing for a new water supply dam to support a growing population.
And it has emerged that council has failed to follow experts’ advice to carefully consider how to use borrowed money and adopt a formal debt policy.
During a recorded interview on Saturday, Mr. Bestwick, who is chair of the city’s finance and audit committee, referred to hotel taxes and casino funds that have been earmarked to pay off part of the proposed $80 million loan as “free money” and “literally not public money.”
He said the $80 million the city hopes to borrow if residents approve a referendum question on March 11 “will increase our debt load to 25% of our capacity, meaning we still have a 75% capacity to do other borrowing, other major projects.”
Later Mr. Bestwick added: “I expect us to do a whole lot more in the next 10 years beyond this project.”
The median municipality in BC used 17% of its debt capacity in 2015, according to the most recently available statistics. A higher percentage means a city has less ability to adjust to unplanned events and changing circumstances.
$100 million in debt needed for future projects
City budget documents approved by council show that on top of the $80 million for the multiplex, the city plans to borrow an additional $15.8 million in the next five years for the Port Theatre, sewer projects and replacing the trestle bridge at the Wellcox property.
Meanwhile, a presentation to councillors in November said the city needs to borrow up to $85 million more in 2021 for a new water supply dam to support population growth.
That project was moved to future years after BBB Architects told council two weeks later that the multiplex would cost $62-$83 million.
Other projects that have not been included in the city’s 5-year plan include:
- $8 million for a new public works building
- $6.6 million for expanding the RCMP operations building; and,
- Unknown cost for replacing or upgrading fire hall #1.
Councillors were also told in November that a new asset management plan that might highlight other possible borrowing needs would be available last month. It is now delayed until after the referendum.
Council ignores debt policy advice
Last May, Western Management Consultants (WMC) advised council that the city had low debt relative to similar-sized cities. But they cautioned council to adopt a formal debt policy before deciding to borrow at higher levels.
“Establishing and adhering to a debt policy will ensure that debt is issued and managed for appropriate amounts and reasons and in a way that protects the city’s strong fiscal health,” said WMC in a report.
The consultants said the city’s debt policy should include:
- Limitations on the amount of outstanding debt such as the maximum debt service ratio the city should have;
- Guidance on when it is appropriate to use debt;
- Consideration of matching debt term to useful life of assets, which can reduce annual payments; and,
- Definition of the types of permissible debt.
To date, council has not considered or adopted a debt policy but voters are being sent to the polls to approve the largest single borrowing in the city’s history.