The economic downturn could work in the city's favour when it comes to building a new fire hall.

"We do believe because of the global meltdown that the tenders will attract bigger companies, possibly in conjunction with local companies, and because of the meltdown probably a lower price than what we budgeted," Rob Fendrick, the city's director of administrative services, said at Monday's city council meeting.

"So I'm thinking that $10.7 (million) is a very maximum envelope at this point, in which case we would borrow less."

Fendrick spoke after Coun. Doug Graham questioned staff on how realistic the proposed $10.7-million budget is to build the new fire hall at the top of Two Mile Hill.

The budget includes a 25 per cent contingency, Fendrick said.

Despite the expectation the city may end up spending less than anticipated, Graham still wondered what would happen if tenders came in over-budget.

Fendrick explained a decision would then have to be made about whether to make budget changes or scrap the project.

Graham's queries followed a report Fendrick presented to council detailing the costs of the building and a recommendation that council move ahead with a first reading of a bylaw to borrow $6.7 million for the project.

The loan would cost the city an additional $4.9 million in interest over 20 years of repayment.

Factoring interest, the entire project would end up costing $11.6 million.

At 6.09 per cent interest, the city would pay almost $580,195 on the loan each year out of its operating budget.

After looking at the four major banks and the Yukon government for loan funding, Fendrick said, the city received the best offer from the Royal Bank.

It offered a 20-year term with the same amortization period (the entire length of time to pay back the loan).

The bank gave the city an indicator interest rate of 6.09 per cent.

The actual rate would be set 60 days after construction is down, likely in May 2010.

"The indicator rate is simply that - an indicator rate for the purposes of establishing an offer," notes the report to council.

"The 20-year term is very attractive as the term matches the amortization period. All other offerings were at about the same indicator rate of interest and with the 20 or 25 year amortization periods; however, the other proposals had five-year terms - meaning that there would be no guarantee on the interest rate and the interest rate would be subject to re-negotiation at the conventional five-year intervals."

The city has already drawn $250,000 from the federal gas tax revenue-sharing program for the design of and consultation on the building in December, and another $2.5 million on March 1 that will go toward construction.

Another $100,000 from the city's capital reserve and the entire $900,000 in the building replacement reserve will come out on Aug. 1, the same day the first $2.5 million in borrowed funds becomes available. All of that would go to construction.

On Nov. 1, a further $2.7 million would be available from the loan for construction.

Gas tax funding would be available for the project again on March 1, to the tune of $250,000, with the final $1.5 million from the loan being drawn for the final phase of construction the same day.

"I know it's always a huge thing for council to have to borrow money, especially at this magnitude, but I think we also know we've identified that it's a priority to replace that particular building and upgrade it and, in this case, borrowing is an absolute necessity," said Mayor Bev Buckway, suggesting city staff have negotiated a favourable rate on the loan.

"Unless we get a money tree," there's no one main area the annual loan payment would come out of, Fendrick said when questioned by Coun. Dave Stockdale.

The plans for the new building were presented by architect Charles McLaren at a council and senior management meeting last month.

Along with the new fire hall, the 2,732-square-metre building will house some offices that are currently in the Municipal Services Building downtown, such as bylaw services.

It will also have a meeting room for emergency measure officials and a room built specifically for computer equipment holding much of the city's information.

The water fill station will be moved to a smaller road off Range Road to alleviate many of the traffic problems that have come up with its current location so close to the fire hall.

While the city will build to certain environmental standards, maintenance and safety services manager George White said this morning the city won't be seeking any sort of certification, which he noted comes with a high price tag.

"I'd rather put the money into the building itself," he said.

To that end, the city will be following LEED (Leadership in Energy and Environmental Design) standards with super-insulation, its windows and so on.

Light shelves - a shelf that comes part way down the window allowing light to bounce off the shelf and into the room - will be put in place to reduce the amount of artificial light needed, for example.

And rather than have two larger boilers, there will be 13 small boilers installed.

The idea behind that, White explained, is more efficiency that comes with boilers being used on an as-needed basis.

If only one small boiler is needed on a particular day, only one will run, but if it can't handle the operation another will come on, followed by another and so on rather than having to use one or two larger ones for less capacity than is needed.

Council will vote on whether to move ahead with borrowing the money for the building at its meeting next week.