City changes philosophy and spends big
Published Saturday December 27th, 2008
A3
By HEATHER MCLAUGHLIN
[email protected]
Rinks. Swimming pools. Convention centres.
The largest ever capital spending plan in Fredericton's history has moved the city from being virtually debt-free in 2005 to owing millions of dollars for capital projects.
All together, Fredericton must repay $114 million (though the federal and provincial governments will reimburse the city $12 million) over the next 20 years.
Just as the average consumer has to borrow for a car or major repairs on a home, loans are a fact of life for most New Brunswick cities.
For close to 30 years, Fredericton lived principally with what has been dubbed the pay-as-you-go philosophy. That budget plan sees the city take a chunk of money from its general operating fund and allocate it to a general fund capital budget. That money, for the most part, has been used to pay capital items - trucks and transit buses - and to rebuild streets, upgrade playgrounds and repair buildings.
In 2009, the city plans to set aside $12.6 million for general capital spending, the largest pay-as-you-go budget without borrowing funds of any New Brunswick municipality, said Fredericton's finance committee chairman Coun. Mike O'Brien.
One of the hitches with pay-as-you-go is that since the money set aside for capital is taken out of the general pool of tax revenue collected annually by the city, to create a big pot of cash would mean zooming up the tax rate, something no elected official wants to do.
"While we were debt-free in 2005, it didn't allow for any major capital expansions," O'Brien said. "When 83 per cent of our total revenue is from property tax ... it's a pretty simple formula - it's either raise taxes or reduce services and people."
Biennial citizen attitude surveys have consistently spelled out quality-of-life objectives they want to see maintained and improved. During the 2008 spring municipal election campaign, mayor candidate Tim Andrew spent most of his time talking about tax burden and the city's need to be more frugal.
Mayor Brad Woodside said he's heard the message and the city will complete the major projects it has on the books, but won't be going hog-wild with future spending.
O'Brien said city borrowing isn't a Pandora's box.
"We've opened this pay-as-you-grow for these major capital projects. Those are the ones we're committed to ... but that does not mean that we just continue to add new major capital projects. We have to pay these ones off."
For the past five years, two factors have bolstered Fredericton's entry into borrowed-money markets: a blistering construction pace that generates new taxable property; and the cost of borrowing money has been at historic low levels.
While Moncton, for instance, has outstanding debt of more than $100 million, it costs that city significantly more to pay its bills. In 2008, it cost Moncton $16.9 million (almost 16 per cent) on its $108-million budget to service its debt.
In 2008, Saint John had $102 million in debt and debt-servicing costs of $11 million, a debt ratio of 9.3 per cent.
Dieppe, the fourth largest municipality in the province, plans to cut into its $77-million debt and shrink its debt ratio to 22.5 per cent in 2009, but debt-servicing costs remain around the $7-million mark annually.
Out of every City of Fredericton operating dollar, debt servicing consumes 7.2 per cent. In raw numbers, the capital city will spend $6.4 million out of its $88.7 million 2009 budget to service debt.
"If you take it back to your own personal household, anybody who is going to add up a household, mortgage, credit cards and bank loans would quickly see that they're far exceeding a 7.2 per cent debt ratio," O'Brien said.
"A municipality that's trying to deliver the services that everybody wants and expects, and service a larger area, and at the same time continue to try to grow the city ... 7.2 per cent is very manageable."
Where has and where is all the money going in Fredericton?
Fredericton has completed construction of Willie O'Ree Place, it's Cliffe Street ice hockey arena complete with indoor walking track and community meeting rooms. A YMCA fitness location is part of the complex.
The rink project cost $16.7 million to build, but the city recovered $2 million as a non-repayable federal-provincial grant toward the project and it will recover the HST it spent on the development.
Henry Park and Marysville outdoor community swimming pools were repaired at a combined cost of $1.3 million.
Royal Road and Queen Square outdoor swimming pools were rebuilt and children's splash areas were built. The Royal Road project cost $1.5 million, while Queen Square cost $1.7 million.
Repairs to the Lady Beaverbrook Rink cost $2.6 million.
That's a grand total of $23.9 million for construction, repairs and upgrades.
The Grant * Harvey Centre, the southside arena complex, is expected to cost about $25.6 million. City council scaled back the seating in the building to reduce the expenditure on the project, which will move to a final design phase in 2009.
The biggest project ahead is the construction of a $75.5-million downtown convention centre, provincial government office building and parking garage.
The federal and provincial governments will contribute $8 million toward those projects.
The city has designed the office building component as a not-for-profit, flow-through 20-year deal. The financing will be on the city's books, but the province will pay for a new downtown government headquarters over the 20-year financial cycle of the deal.
A few things have helped the city keep its construction spending in line, including hiring a professional projects manager.
"It's been paying dividends since the day he came on board, keeping contracts in line and negotiating best deals," O'Brien said.
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Developer wants city to annex southside land
Published Friday December 26th, 2008
A6
By HEATHER MCLAUGHLIN
[email protected]
A Fredericton developer wants the provincial government to allow the City of Fredericton to annex land he owns outside the city limits.
City council is backing the proposal and has passed a resolution asking that the Department of Local Government conduct a feasibility study into the annexation of two properties owned by Colpitts Developments.
The Fredericton real estate management and land development company has property holdings within city limits at Rainsford Lane and Prospect Street.
"We've got approval from the Hanwell local service district, which is where the land is right now. We've got approval from the City of Fredericton and the province is on board with it as well. It just has to go through the process. Everyone has been very supportive of it," said Willy Scholten, chief financial officer with Colpitts Developments.
"There's not a lot of land available on the south side of Fredericton for housing developments like this. This is 290 acres right on the boundary with Fredericton, and really it should be considered part of Fredericton."
Scholten said if approval is given to move the vacant land into the city, it will open the way for Colpitts, as well as for many private-sector home builders, to purchase land for new homes.
Colpitts will create a planned development in conjunction with the city.
"It's a very exciting project with multi-purpose development, with commercial and quite a variety of residential," Scholten said.
"What we're working on right now is kind of our grand entrance into High Point Ridge development and that's coming off Prospect Street. There will be spectacular lots there with views of the St. John River Valley."
Given all the growth along the western boundary of the city limits, it makes sense to keep extending water and sewer lines and make the land suitable to future development, Scholten said.
"It just doesn't make sense to do it outside the municipality," he said.
Scholten said the procedure for annexation should be straightforward because there are no immediate neighbours to be affected by the annexation.
"Our expectation is that the city work will be done by the end of this year and the province shortly thereafter, and then it will have to get cabinet approval," he said.
If all goes well, lots may be available in the spring, Scholten said.
"It is open to all developers. Anyone who wants to come in there and build a home, whether it's a private individual or other developers want to go in and build homes there, we're open for business," he said.
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