At Monday’s meeting to discuss the proposed RCMP detachment and fire hall, which this time looked at financing, staff recommended council may wish to defer construction for a few years based on the cost of the building.
“I don’t think it comes as a surprise that the City’s financial position is not that great. There are more jobs than there were a couple of years ago, but there are still a number of people who are having trouble in our community. Council recognized this when they passed a tax increase of 1.5 per cent, below the rate of inflation….Barring the willingness of the community to entertain a fairly large tax increase and given that we are working with the RCMP,we may be in a situation where we want to defer actual construction of the facility for a couple of years, but get the planning done so it is shovel ready when the funding is found,” said chief financial officer Dan Rodin, who gave a rough estimate on what it could cost taxpayers for a new RCMP detachment.
“If we assume we’re building one building and the cost is around $10 million at the current interest rate, which the Municipal Finance Authority forecasts to be 4.5 to five per cent over 30 years, that would mean a $650,000 payment every year for 30 years…A one per cent tax increase generates $100,000, so if we look to finance a $650,000 payment through taxation it would be a six to seven per cent tax increase, and I don’t think that is realistic at this time.”
Rodin said the reason he recommends waiting is because of the number of projects being looked at for the city, such as the Canpotex terminal on Watson Island, the potential redevelopment of Watson Island and the pellet terminal proposed for Westview Terminal.
“The container terminal pays $650,000 in municipal tax, Prince Rupert Grain pays over a million, so if we had a significant development come to town it is possible that we could phase the development of a fire hall or police station in a manner that, as projects come online, the taxes could offset the capital costs of the building,” he said.
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Before Rodin discussed when the building could be built, Tim Spiegel of SSA Quantity Surveyors outlined the different options to get the building done.
The first option is for the city to get its own design team and construction team through a competitive bidding process, with the architect as the prime contractor. Under this model, the City assumes all the risk should the project go over budget and dictates what is used in the project.
The second option is to get a general contractor to assemble a team to design and build the facility to a certain standard set out in the contract. In this model the contractor takes all the risk, but a compliance team is needed to ensure what the contractor said they could deliver is being delivered.
The third option is essentially a public-private partnership. Here a private business would finance, build and possibly maintain the building to the standards set out by the City, and then charge a monthly or annual fee to either lease back or sell back the building.
“They all work well under different circumstances. We know in the current market that [the second option] will provide better value for the dollar, but it won’t always be that way,” he said, cautioning council that the capital operation cost will outweigh the capital construction costs over the life cycle of the building.
“For example, with the current RCMP building I have to ask if it could have had an extra 10 years of life had they spent more on the capital construction cost.”
When discussing options for financing the building, Rodin mentioned that the City could likely get a lower financing rate that a contractor, and that a company undertaking a private-public partnership would be looking to profit from that so expenses would likely be higher.
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One of the final pieces of the puzzle for any new building is where it will be located. So far Spiegel said he has been shown two potential sites for the building, and Rodin noted there will be a report to council at the next meeting listing the possible sites.
While not confirming or denying any potential site, Rodin did note that the four corners at the intersection of McBride and 6th Avenue are owned by the City and there is a covenant on them that stipulates they must be used for community undertakings as they were donated to the City by the Grand trunk Pacific railroad.
