The proposed new city operations building would not cause financial distress to the city, members of city council were reassured at their meeting Monday evening.

Valerie Braga, the city’s chief financial officer, presented council with a six-page report detailing the financing plans for the new building that’s planned off of Range Road toward Two Mile Hill.

The plans would see the city borrow just under $19 million for its new building.

“Overall, funding the operations building component as proposed was financially planned for,” Braga said.

“An allowance has been made within the annual capital spend limits to pay the debt servicing costs. The project financing is not anticipated to cause any financial distress to the city.”

The report comes a week after the city released its proposed $46.6-million capital budget for 2017.

The bulk of the budget – at $39.1 million – is set aside for the operations building.

That structure will see the equipment and many of the staff who currently work out of the Municipal Services Building (MSB) downtown, moved to the new building. A further $1.5 million for the project is outlined in the 2018 spending plan.

The city has maintained the exact cost won’t be known until the detailed design is complete. Last week, however, Mayor Dan Curtis told reporters he has confidence it will come in within the estimates projected by city staff.

This week’s report details where the funding would come from as well as the background on the project.

“The operations building is the first and largest component of what was previously known as the building consolidation project,” it was noted.

“Initial work on the project was first approved by council in 2014 to allow for preliminary planning activities that continued through 2015 and 2016. The overall project has now been refined.”

The consolidation project would have seen the many city departments scattered throughout the community moved to one of two locations – the large operations site off of Range Road near Two Mile Hill, or a new service building added to the same site as city hall (with no plans to alter city hall).

The larger site would have housed all of the heavy equipment, vehicles and such, providing an area for transit buses, operational equipment and the like and other departments.

Meanwhile, the service building was set to house departments that many people deal with on a daily basis like planning, parks and recreation and the like.

Since then, the focus has turned to getting an operations building constructed that would house the equipment and operations staff who currently work out of the MSB building, then add onto that space and move other departments and facilities as funding permits.

Under questioning by Coun. Rob Fendrick last night, it was confirmed office space will need to be leased for the 34 staffers now in the MSB who won’t be moving to the new operations building after the MSB is closed. That cost is not yet known.

The full estimated $10 million needed for a new service building is anticipated to come from the federal Build Canada Fund.

Peter O’Blenes, the city’s director of infrastructure and operations, said the leased office space is expected to be needed for about three years until the service building is ready for occupancy.

The report highlights the city’s plans to use its $11.6 million from its reserves, $15.2 million from gas tax funding with the final $18.8 million being borrowed.

“As part of the adoption of the 2016 financial statements, administration is anticipating bringing forward a reserve right-sizing recommendation that will reallocate $3 million from the building reserve to the land bank reserve,” it’s noted in the report.

“The land bank reserve will then contain enough funds to fund the $11.6 million required for the project; until this time, the funds for the project remain in the land bank and building replacement reserves.”

At current interest rates, it’s expected the city would be locked into to a five per cent rate for 20 years.

Coun. Jocelyn Curteanu wondered about the five per cent rate, noting most fixed-rate mortgages are less than that.

Braga said those standard mortgages are fixed for five years. With a rate locked in for 20 years, it means a bit of a higher rate but guarantees that it won’t increase for two full decades even if rates go up.

Braga also said the city would likely go through a borrowing bylaw and request for proposals process to find a lender.

“(The bylaw) will come forward to council after the 2017 to 2020 capital budget has been approved, and if the borrowing bylaw is approved, will result in an RFP being released seeking borrowing proposals from qualified lenders.

“The borrowing is anticipated to start with a construction-type loan where funds can be drawn down as required, and then converted to a 20-year loan at the end of construction.”

Under the territory’s Municipal Act, a municipality can borrow up to three per cent of the annual property assessment. That would be more than $82 million based on information as of last December.

“The 2015 audited financial statements record debt of $9.2 million; taking on an additional $18.8 million is well within the city’s legislated limits,” the report says.

It’s noted that the borrowing could put the per capita debt at $1,050.51, exceeding the city’s own debt management policy of a $500 per capita debt limit in 2017.

City council has the authority to vote to move ahead with the borrowing despite exceeding that limit.

“While the per capita debt is exceeded, it is proposed that the 2017 to 2020 capital budget bylaw will contain wording acknowledging this and specifically authorizing it,” the report notes.

“In the longer term, administration acknowledges that the debt management policy is outdated in nature and needs to be reviewed and amended as part of the development of the city’s long-term financial plan.”

Of particular concern for a number of council members are the ongoing costs of operating the building once staff have moved in.

“I do remain extremely concerned about the operational costs,” Coun. Dan Boyd said.

O’Blenes acknowledged the newer building, with greater energy efficiency, will cost less to operate than the MSB on a square metre basis, but also noted the building will be much larger than the MSB.

As the report stated: “Ongoing operating costs of the operations building are not yet known.

“While the operating costs per square metre will decrease due to improved efficiencies, the building itself is larger than existing spaces due to the fact that the building is being built based on anticipated future space requirements (10 year projection).

“Administration continues to work with designers and architects to build and refine operating cost estimates with a goal of not exceeding current operating costs. As plans progress, council will be informed of the progress in this regard.”

The city’s next big step for the project will be approving the 2017 capital budget, which would allow it to move forward.

A public input session on the budget is slated for next week, with second and third readings expected to come forward Dec. 12.

Coun. Samson Hartland, who has expressed opposition and voted against any contracts associated with the plans (such as the design, clearing of the land and so on) was absent from Monday’s meeting.