Fire Hall costs may reach $4.9 million with loan interest
The construction cost of the proposed Fire Hall is projected to be less than $3.9 million. However the total cost to tax payers could be close to $4.9 million. It all depends on the actual construction costs and the interest rates available when the Gabriola Fire Protection Improvement District (GFPID) Board takes out its proposed $2.3 million loan from the province.
The proposed Fire Hall #1 replacement has already cost Gabriola taxpayers $300,000, according to Sandra Rudischer, Treasurer for the Fire Board.
Sandra explained that while the hall is under construction, temporary financing will be obtained through a financial institution and will be in place until the project is completed.
The interest rate for the loan will be at the floating rate of Prime + 1/2 per cent (currently that would be 3.5 per cent).
Sandra said, “We were able to secure a very attractive rate (roughly 50 basis points below market) through Coastal Community Credit Union for our temporary borrowing.”
Once the project is completed and final cost figures are known, the long-term borrowing from the government will be used to pay out the temporary CCCU loan and the interest rate will be set by the Ministry of Finance at that time.
Sandra said, “The rates are preferential and usually lower than those available from financial institutions. The term of repayment will be 20 years.”
Currently the board has $1.6 million remaining in the capital reserve fund it has built up over the past ten years. This is the remainder of the reserve after the $300,000 was paid out of it.
She confirmed the $2.3 million the board is seeking the public’s permission to borrow through the March 25 referendum will the absolute maximum principle figure that can be borrowed.
“We feel confident [construction costs] will be less,” she said.
“The borrowed amount is a principle figure, while the total obligation includes interest.”
If the board is successful in obtaining a 3 per cent interest rate from the ministry, the interest accrued over the 20 years would be $756,246.
This, combined with the principle of $2.3 million, the reserve fund of $1.6 million and pre-construction cost of $300,000 adds up to $4,956,246.
Sandra added, “The actual dollar amount that will be borrowed from the province (long-term debt) can only be determined by the timing of borrowing, and when the actual final figures are known (hall is complete).
“The $2.3 million is the maximum principle amount to be borrowed, both short-term (through the financial institution) and then long-term when the hall is complete and the debt payment is then included in our property taxes.
“The long-term loan will be over a 20 year amortization at the rate in effect at the time. Hopefully three per cent is what our rate will be but that is something we won’t know until we are there. Good thing we have a healthy reserve fund otherwise the costs of borrowing could have been closer to $1.3 million.”
Joshua Craig, Financial Analyst with the Ministry of Community, Sport and Cultural Development emailed the Gabriola Ratepayers Association his department had recently received a quote from the Ministry of Finance for another improvement district for fire hall construction. He wrote, “The quoted rate was the lowest we’ve seen: 2.75% fixed over twenty years. I do not know if that rate will be maintained for the time that it will take for a hall to be built for Gabriola, but it is a great rate.”