A new loan for Nakusp’s village-owned hot spring is expected to take advantage of low interest rates and keep the hot springs expenses separate from city reserves.
The Village Council voted in its April 26 meeting to take out a loan for work done beginning in 2006 that was done with part of the Village capital reserves.
The move isn’t a legal requirement, said Mayor Karen Hamling, who noted that contrary to initial reports at a previous meeting, the use of the city’s reserves was properly transacted with a by-law.
“We used our reserves to take the loan out to repair the hot springs – we didn’t use all the reserves. There was a million in reserves and we took out $650,000, and we did do it by by-law,” Hamling said.
At the previous meeting, the by-law hadn’t been located in time for the budget report, which caused confusion, Hamling said.
Village administrator Linda Tynan said the transaction was treated as a loan, complete with interest entry, in 2007, but not in subsequent years.
Hamling recalled the conditions requiring the work at Nakusp Hot Springs.
“We had to replace the whole pool part, the lining and all that, because it had deteriorated. It was Fiberglas and it was peeling off,” she recalled.
Tile and grouting were used in the pool repair.
“The health department had come along, the regulations had changed … we had to do more than anticipated,” she said. “We had to change what we had for decking because (health regulations said) it needs to be scrubbed down every day.
A gutter system was put in, and mechanicals were replaced, she said.
“All that stuff was pretty old,” she said, noting that much of the replaced material dated back to the 1970s.
So how long is the 2006 replacement material expected to last? “I hope it’s good for a good long time,” Hamling said.
The council of the day decided to use reserves for a simple reason, she said. “We did use reserves for that because at that time the interest rates were really high – they were in the 8 and 10 percent,” she said.
The council wasn’t concerned about depleted reserves because there was still $700,000 or so in reserves, Hamling said.
At the same time, Nakusp was doing a great job of getting grants. Mostly with the help of Delterra Engineering, the town secured grants to upgrade water and sewer systems, put in another well and replace the ice plant at the arena – to the tune of about $6 million.
The projects required some matching funds, and that’s what the rest of the reserves were used for, Hamling said.
“For a little town, we’ve done very, very well with grants … that’s where most of our reserves were … Those grants aren’t coming around again,” she said.
Some of the grants came from Towns for Tomorrow, some from gas tax funding. The emergency services building was financed with federal stimulus funds designed to boost the flagging economy, as were part of the water and sewer improvements.
“They said there’s no more of those coming forward – that’s why we went after them instead of biding our time,” Hamling said.
Province-wide, the town is known for its grant savvy, she said.
Still, the council that came into office in 2006 had expensive work on its hands.
“It was a tough time – we were a council that took over when things were coming to the end of their cycle,” she recalled.
Last weeks motion to refinance $700,000 to put back into the reserves will put the debt on the hot springs. It will also take advantage of currently low 4.2 percent 20-year debenture rates.
“The hot springs will have to pay back that loan,” she said.
The accounting could be particularly important since the hot springs is currently for sale at its assessed value of $2.9 million, a package that includes the building, the pool and some 147 acres as well as a transfer of the rights to the bubbly warm water – and a promise to the government that the public will continue to have access to the hot springs.
City administrator Linda Tynan presented another draft of a proposed budget. She said the city’s extremely low debt rate – with an available borrowing limit of close to $8 million and just four outstanding debentures – puts the city in an enviable position.
Of municipalities under 2,500 population in British Columbia, Nakusp is second from the bottom for indebtedness, with just over $1 million including the debenture for the hot spring.The decision to borrow will replenish the village capital reserves according to long-term planning, so that by the end of 2011, the capital reserves will be robust again so that capital purchases don’t bite into the operating fund.
Possible budget trimming measures discussed in the April 26 meeting including delaying funding signage, looking for additional grants, possibly reducing the amount used to repair the Village office, putting off the purchase of a truck for the hot springs, cutting back training expenses where possible while keeping upgrades for core certifications, bumping back the amount spent on the sidewalk repair program and deferring a drainage study.
The costs of water treatment will be examined, and a decision on utility rates and possible increases could be addressed in October or November, Tynan said.
The budgeting process involves a lot of work, she said.
“We really went through it over the last little while and came up with some things we thought were discussion items,” she said.
If additional costs can’t be trimmed, a 1 percent tax increase would be required, a figure that would generate an additional $8,400 in revenue to cover the Village budget, she said. As a utility, garbage collection in the Village will run a $10,000 shortfall this year, Tynan said.
“It indicates we should increase the cost of garbage (collection),” she said.
While the Village did increase the bag cost recently, the regional district increased its “tipping” fees, she said.
Other pulls on the village budget that came up at the April 26 meeting included the Chamber of Commerce, which is asking for more than the current allotment of $8,000, Hamling said.
An additional $10,000 for the arena’s ice surface has been requested. The council will need to adopt budget tax rate by-laws by May 15, so a final budget will need to be done by May 13.
Tynan said the city’s finances are in good condition.
“I must say that even though your situation here is that you had some digging out to do, your actual financial position is not too bad,” she said.