Whatever way the Town of Oliver slices it, it’s looking at a sizable debt over the Gallagher Lake canal repair project.
On Monday, council discussed the $22.3 million government grant request for canal relocation and repair. The project consists of relocating the siphon around Gallagher Lake (along Highway 97) and fixing other sections of the canal.
Chief Administrative Officer Cathy Cowan said the Town would need to borrow $6.38 million.
Interim Chief Financial Officer Doug Leahy said the annual payment would be $216,920, plus the principal payment of $134,103, for a total of $351,023.
He said based on the 2019 revenues of the water utility, the total increase in rates required to service the long-term debt of $6.38 million would be approximately 11.3 per cent. That is based on today’s borrowing cost, which is 3.4 per cent. The amortization period would be 30 years.
The canal relocation project is anticipated to commence in late 2019 and be completed in 2023/2024.
Cowan said if the project is approved, the Town has the opportunity to amend the scope of the project.
But water councillor Rick Machial expressed concern about borrowing that much money.
“I don’t want to be borrowing $6.3 million. We already have $4 million in debt in the water fund. I mean, we are burdening ourselves with incredible debt.”
Machial asked what would happen if interest rates go up?
“I don’t have a crystal ball that looks into the future, but we got to make sure people can afford their rates.”
Councillor Dave Mattes said it’s no different than putting a 30-year mortgage on a house.
He noted that this repair project means the Town won’t be spending $100,000 on canal repairs every year.
But Machial suspects the Town will still be doing repairs on the canal after this project.
The water councillor asked what the debt would be if they only did the canal rerouting project at Gallagher Lake. Cowan said between $2 million and $3 million.
She noted the Town does not need electoral assent to borrow money for water capital expenditures.