The City of Moose Jaw’s debt level will increase to nearly $90 million because of an agreement to support the Buffalo Pound Water Treatment Plant’s renewal project.
During its May 24 regular meeting, city council voted unanimously to authorize the Buffalo Pound Water Treatment Corporation (BPWTC) to start financing negotiations with the cities of Regina and Moose Jaw to address the extra $55 million needed for the project.
Based on the ownership percentage of the plant, Regina will contribute $35.7 million and Moose Jaw will contribute $14.3 million. While Buffalo Pound requires this funding to be finalized now, the cash will not be required until 2024.
Council also authorized the finance director to negotiate any necessary financing guarantee and assist the corporation with arranging financing as needed. Furthermore, city administration will bring a report to council with details about the financing and applicable borrowing bylaw and/or guarantee bylaw needed for approval once financing has been negotiated.
Judy May, chair of the corporation’s finance and audit committee, and Ryan Johnson, president/CEO, spoke to council during the meeting.
Debt limit and water costs
Moose Jaw’s debt load sits at $72.7 million but providing the extra funding for the project will increase that to $87 million, finance director Brian Acker said in his report. The municipality’s debt limit is $95 million.
“While the debt must be approved now, by the time the funds are required in 2024, $8.75 million of the current principal will have been repaid,” he wrote.
Meanwhile, the BPWTC will charge Moose Jaw an extra $100 per megalitre of water consumed, an increase of 10 cents per cubic metre of water, Acker continued. For Moose Jaw customers, city hall estimates this will translate into a one-time increase of 6.82 per cent in water consumed; Buffalo Pound estimates the one-time increase will be 7.1 per cent.
Regina customers will pay a one-time increase of 4.5 per cent.
Besides potable water consumption, the increase will also be applied to sewer rates.
During the meeting, city manager Jim Puffalt said that the municipality was “getting very tight” with its debt load and “closer to the limit than most of us like it to be.” Yet, he expected the city to be in “reasonable shape” after paying nearly $9 million in principal payments.
Project costs
The cost of the plant renewal project in January 2021 was $252.8 million, with $163.4 million expected to be covered by a federal grant, Acker said in his report. Since then, the cost has increased by $72.8 million to $325.6 million.
The two municipalities will cover $55 million of that increase, while Buffalo Pound will cover the rest.
“The change in cost is due to increased prices and price volatility for oil, iron, copper and (a) skilled labour market that began during the pandemic but have been further impacted by continued supply chain disruption,” he continued. “In addition, impacts to energy and commodity prices from global events continue to impact projects (by 20 to 40 per cent).”
Council discussion
“This is a very big deal, and water security is very important and should be for Moose Jaw and Regina,” said Coun. Jamey Logan, before wondering whether residents would have to pay more money in five years for future upgrades.
This is the last cash request the corporation will make for the next 25 years, Johnson said. Short of new government requirements, the current renewal project should take the water treatment plant to 2050.
“I’m not surprised you’re back before us today, knowing that construction costs have definitely changed. This is a significant increase … ,” said Coun. Crystal Froese, who appreciated all levels of government supporting water security for the region.
Froese also thought that while paying $16 million in PST construction costs was huge, there was nothing anyone could do except move forward and ensure residents had quality water.
The next regular council meeting is Monday, June 13.
