Council approves long-term debt of $10.7 million for Centennial Drive work

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A staff report cited “financial difficulties in some of the reserve forecasts” as the main reason for funding $10.7 million through long-term debt.

The second phase of the city’s Centennial Drive area improvement project is estimated to cost approximately $17.8 million. As a result, City Council has decided to finance up to $10.7 million of the cost of the project through long-term debt over the next 20 years.

The three-phase, multi-year project plans to reform the waterfront area and provide services for future development. In total, the project will cost the city approximately $23.1 million and includes the reconstruction and realignment of the Mississaga Street East/Centennial Drive/Canice Street corridor from Front Street North to Brant Street East.

The project will also include the provision of utilities for surrounding future development, the burying of existing overhead power lines between Mississaga Street and Tecumseth Street, and the removal of the main sanitary sewer.

“It’s really important for our tourism industry as well as for the protection of our park,” the councilor said. Ralph Cipolla at the board Monday night. “The way the study went and everything, I think is really important, and I hope everyone will support that because it will be a big improvement for our Couchiching Beach Park. “

The contract for phase two is expected to be awarded in June, with construction expected to be completed by the end of 2022.

A staff report cited “financial challenges in some of the reserve forecasts” as the primary reason for funding $10.7 million through long-term debt, adding that “debt financing was considered for help smooth out these costs over time to relieve pressure on reserves. ”

As of December 2021, the city’s external debt stood at $3.8 million. According to the staff report, $2 million of this debt (the last debt related to the construction of the Orillia Public Library) is expected to be paid off by the end of 2022, with the remainder to be paid by 2026.

“The time to issue new debt is good as it will replace the current maturing balance,” the staff report said.

The staff report called on the board to approve financing the project with long-term debt as soon as possible, due to the significant interest rate increases recently implemented by the Bank of Canada.

“Staff are hoping for a 20-year interest rate of around 4%, which would give annual payments of around $800,000. The Bank of Canada’s recent increases came as a surprise to the industry, as many industry experts believed that COVID-19 and the war in Ukraine would delay major interest rate adjustments.” , says the staff report.

“However, increases in March and April were aggressive with indications of further increases over the next five meetings in 2022 to push the overnight rate up from 1% to 2.25%. This is the most aggressive rate changing trend since the 1980s…it would be prudent to lock in the city rate as soon as possible to minimize the impact of any further interest rate risk,” recommends the staff in the report.

About $7 million of the project’s phase two costs will be covered by grants, with the remaining balance paid for by the city’s water and wastewater supplies and development charges.

The Board originally approved funding part of phase two through long-term debt in the 2022 capital budget.

The city will submit an application to the Ontario Infrastructure and Lands Corporation (OILC) to request funding for the project.

“Staff contacted three financial institutions and determined that OILC offered the most competitive rates,” the staff report said.

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