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I just wanted to clarify a few points about the Crystal Pool Replacement Project costs. Some basic info is on the City’s website, but there are a few things that sometimes get confused in some discussions.
The following is my understanding. Please let me know if you have any comments or questions.
First, the projected cost is not $162.2 Million or $168.9 Million as sometimes stated. That’s just the external borrowing. The total capital cost is $209.2 Million (north site option) or $215.9 Million (south option).
The $47 million difference (between the external borrowing and the total) would be borrowed from City reserves. It makes the external borrowing look smaller on the referendum. However, it must be paid back.
The above does not include interest on the external portion of the borrowing – the $162.2 million loan – which would require total interest payments of $101.42 million or $5.07 million annually. The annual principal and interest payments would be $13.181 million for a total repayment of $263.62 million.
Second, the property tax increase that would be required to pay for it, if it were going to be covered by taxes, would be 7.24% (north) or 7.54% (south). This would be phased in over 5 years, and would last for 20 years, at $232 per year for the average residence or $596 for a typical business. So that’s $4,640 total per residence.
(However, please note that it’s not going to be paid by taxes, but rather by cuts to other services – see below.)
However, this only reflects the cost of paying back the external borrowing. The cost of repaying the $47 Million borrowed from reserves, which is mandatory, would be about a 2% tax lift (services cut) per year, lasting for 15 years. That’s another $900 total per residence. This raises the total tax lift (services cut) to about 9.24% or 9.54% for the first 15 of the 20 years.
So total capital cost $5,540 per residence.
Finally, operating costs have not been included in the above. The new facility can be expected to cost roughly an extra $2 million per year more than the current facility, adding another 1% to the tax lift (services cut) once fully operational in 5 or 6 years.
So the total tax lift (services cut) would be 10.24% or 10.54% for 15 years, and 8.24% or 8.54% for another 5 years, and 1% for as long as the facility lasts.
There are some interesting discussions on the costs and trade-offs in the replies over at Bluesky.
How much is that?
Let’s consider some context, to give the numbers more meaning.
First up: comparing a common household purchase. The project’s capital cost is roughly $5,540. Over 20 years that’s $5.32 per week per average residence. That’s pretty close to one fancy coffee with taxes and tip per week.
Now let’s compare a larger household item. Everyone knows their rent or mortgage cost, but fewer know the cost of car ownership. Depreciation, repairs, maintenance, insurance, gas, etc – all included the average car costs roughly $10,000 per year. That’s $192 per week.
We could go on with household cost comparisons but are they meaningful? Probably not.
Why?
It’s actually not going to be a tax increase, but rather a cut in other services
The decisions on how to pay for the borrowing will likely be made by Council, not by households. Council will likely reduce City services, rather than ramping up property taxes above existing baseline tax increases.
That’s the real context.
We have already seen the current Council majority seeking property tax increases smaller than what is required to maintain services at current levels. In October, City staff came forward with a draft financial plan to keep services at existing levels, which would result in a 12.77% property tax increase.* In November, Council directed staff to come back with reductions to reach significantly smaller tax increase levels, ranging from about 6% to about 10%.
You can see for yourself the types of things that would need to be reduced or eliminated in order to meet those levels: on December 4, staff came back with scenarios in a report.**
Note that these budget numbers do not include Crystal Pool Replacement Project costs. If that Project goes ahead, the budget reductions would need to be significantly deeper in order to meet those politically-determined tax increase targets.
What exactly would be cut in order to fund the Crystal Pool Replacement Project? I don’t know. That would be a decision of Council. Nobody has made any public proposals on this point.
Here are some examples of spending reductions from that staff report noted above.
Remember these are just examples. And not all of them. Council could also direct spending reductions other than what are noted in the staff report.
Notes:
* The “municipal price index” of inflation faced by cities includes construction costs and is significantly higher than the CPI (consumer price index).
** Note that the document discusses the City portion of the tax increase; the police portion would be added to this.