While the Estevan city council agreed when they approved the 2015 City of Estevan budget to borrow $5 million to finance capital projects this year, council exhibited some hesitancy when the time came to sign off on the loan.
During Monday evening’s regular sitting of council, the councillors did unanimously approve the loan, but there was some question that if the City’s financial position had improved since budget deliberations, whether it was necessary to borrow $5 million.
Coun. Greg Hoffort said the City had received unexpected funds realized from some development agreements, which had been budgeted in a previous year, and the tender for work at the airport, which had been estimated at about $5 million, was awarded by council Monday night for more than $300,000 less.
“I understand we definitely need to make sure we’re adequately funded for capital,” he said. “I understand we need to proceed with the necessary capital improvements and in no way do I want to impede that. But I do want to make sure that $5 million is the amount. I just wonder, in light of some of the new information, is there any desire to pursue slightly less than the $5 million?”
He said once council approves the loan, the City would be locked into a 15-year amortization at an annual interest rate of 3.32 per cent. According to the terms of the loan, an interest only payment of $55,333.33 will be paid in August, and the City is scheduled to begin principle payments next year.
“Given our united position on council to continually tackle the debt and move things in that direction, I wonder if some of these things could be looked at,” said Hoffort.
“Things have changed a little bit in the environment with some of our developments coming through,” said Coun. Lori Carr. “The real question is, do we actually need the $5 million or is $4 million sufficient?”
She said with extra money that has come in, the former may not be necessary, and the City could save on interest by accepting a smaller loan with a shorter term.
“We’re looking at 2015 moving forward,” said Coun. Kevin Smith, who added “2014 is history. We’re not talking about how it has affected our cash flow, we’re talking about that we’re going to borrow $5 million and no where are we discussing that it is an absolute need for operational cash flow.”
City Manager Amber Smale said the funding the City received from the developer didn’t clear out the entire 2014 deficit.
“You’re asking if the financial situation changed. We’re still in a deficit,” Smale said.
The City manager said after the meeting, the City’s capital program in 2015 is close to $8 million, and paying for that program has left the City finding revenue in a number of sources, including property tax increases and taking on more debt.
“There was no cushion put into that budget. It’s what we need to deliver that capital program. Everything we have right now is money on paper. Until we see that in real terms, I’m hesitant to have council make decisions about a surplus we don’t have on the books yet,” said Smale.
Smale noted making changes to the terms of the loan or renegotiating a different amount is more complicated than a new conversation and a handshake.
“I just want you to understand the impact of (City treasurer Jeff Ward) going back and entering further negotiations,” said Smale. “You approved this budget based on going after $5 million with no direction to pursue these other options. If we change it now, we are going to have to go back and revisit our overall budget. We are going to have to go back and re-amortize. We are going to have to delay this (airport) tender.”
Regarding the airport tender, Smale said if the City didn’t approve the loan, she couldn’t permit council to award a contract she knew the City didn’t have money for.
Mayor Roy Ludwig added, “I’m a little bit surprised because we went over all this in January. Everyone agreed to it. We gave the City treasurer the direction, and now here we are, it would appear, going back on what we agreed.”
Ludwig noted, the City’s financial situation isn’t necessarily any rosier than two months ago, saying there were some funds the City thought they would receive from developers at the end of 2014 that didn’t materialize. Ward said at the end of December 2014, the City had $3 million less than what it had planned for, and they were running a $1.575 million deficit. The new funds from developers this year, Ward added, would get the City back into the same position it was in when budget deliberations occurred in January.
Despite unanimous support, the approval appeared to have left a bitter taste in at least one councillor’s mouth.
At the foot of the meeting, Carr said she felt bullied into accepting the terms of the loan following a discussion by councillors who expressed an interest in renegotiating and perhaps borrowing less than the previously agreed on amount.
“There was discussion from at least half of council that if they had a choice, they’d like to borrow less,” said Carr. “Today we sit here, and we’re trying to have an open discussion about other options, if possible, and we’re basically belittled and being told we have a decision, we’ve made a decision in budget, and that is it.”
Carr said councillors were interrupted and unable to finish their comments.
Ludwig thought the dissent had more to do with politics than the flow of the meeting.
“OK Councillor Carr, I think that’s cheap political points you’re after, but if that’s what you wish, that’s fine,” he said.
Ludwig and Carr are both seeking to run for the Sask. Party in the Estevan constituency, and the nomination meeting is to be held on March 26.
