MH approves $12.5M arena reno in 4-3 vote
The Minden Hills arena project is a go.
Mayor Brent Devolin broke a tie with his vote of yes to award the $12.5 million arena renewal contract at a special meeting held Feb. 14.
Councillors Bob Carter, Jennifer Hughey and Pam Sayne voted no, and Councillors Ron Nesbitt, Jean Neville and Deputy-Mayor Lisa Schell voted yes to approve the project. With Devolin’s yes, the final vote was 4 – 3.
The arena project, which involves demolishing the current arena, built in 1972, and building a new arena with a 200-foot-long ice rink, bleachers, six change rooms, multipurpose gymnasium, and elevated walking track was awarded to an integrated project delivery team which consists of McDonald Brothers Construction Ltd. and Parkin Architects Limited. The request for proposal was approved in principle by the township’s previous council, just before the lame duck period last year in July.
The high cost of the project, the single bid, that a feasibility study was not completed, and that the design does not include a pool has made the issue a contentious one for the community and council.
Lorrie Blanchard, CAO and treasurer, summarized financing information to open the special meeting.
Project construction costs include $9,497,487 for the arena and main lobby and $2,997,083 for a multi-use activity facility for a total of $12,494,570. Additionally, added value items could total $252,800, construction phase financing costs are $155,000 and estimated legal fees total $50,000, bringing the estimated project prior to numbers being refined to $12,952,370. The construction interest rate as of January 2019 is 2.69 per cent. In what Blanchard called a worst case scenario, with no government funding or fundraising toward the project, and based on the 2019 interest rates, the amount to be borrowed would be $11.9 million over 25 years, representing a need for a 5.11 per cent increase in the levy. The average residential waterfront property assessed at $414,000 would be $57.85. A residential property assessed at $212,000 would see an increase of $29.67.
“That is assuming that we are going to raise this entire differential in one year,” said Blanchard.
Councillor Bob Carter said he thought two things were important to recognize, in terms of perspective of risk.
He said an interest rate can only be locked in upon the construction’s completion, theoretically in the early fall of 2020, so he said there was a risk of what could happen to the interest rate in that interim period, and called for a sensitivity analysis on that point. Secondly, Carter noted that 2021 would be the first year in which annual costs would really be clear.
Crunching Blanchard’s numbers, Carter said it works out on an annualized basis, assuming that there are no cost overruns and assuming the interest rate stays the same, that waterfront property owners who pay about $1,450 in municipal tax now would pay about $162 a year as a result of the arena project, and if interest rates went up one per cent, it would cost $178 a year.
“So that means that 10 to 12 per cent of somebody’s municipal taxes would be going to pay just for this arena,” he said, noting he was basing this on the annualized rate for the next 25 years. “It really comes down to, do we want to be paying 11 to 12 per cent of everybody’s taxes going for this arena?”
“Except for the presumption that you made on two accounts ... that it’s based on zero fundraising, and zero government money,” said Devolin.
“It is based on zero fundraising and zero government money,” said Carter. “But right now, I don’t in front of me have anybody who has pledged a dollar, that I know of, and I don’t have any government that has pledged a dollar towards us ... If we had money in hand, right now, or if the government, who is sort of cutting back in all ways was to come up to us and offer some money to us, that changes everything we’re looking at, yes, but the fact is that I’m just trying to tell people what it is from a risk management perspective.”
Neville responded to Carter’s waterfront property tax estimate.
“The option to do nothing is not on the table, we have to spend money on that building or not use it at all,” she said. “I think this is the opportunity to do it and do it properly. It’s for [the future]. It’s going to give our community an absolute wonderful boost. I am totally behind it, and as a waterfront residential owner, I mean, our taxes are the highest of anybody’s in the municipality and I can’t see that, what Councillor Carter brought to light, is going to cripple me.”
Carter said he and Neville were virtually neighbours, on the same lake.
“It’s not going to cripple me either,” he said. “But I believe we are here to represent everybody in the community.”
Carter said some of the information felt misleading, and joked that the discussion was like Fun With Figures.
“I don’t want people to be just thinking that we’re only having to be paying this incremental, because we’ve already added $320,000 to the taxes last year and $535,000 this year, and the monies you’re talking about are over and above that,” he said.
Councillor Pam Sayne also voiced her concern about the project prior to the vote.
“We have a very unpredictable future in this community in terms of what to expect in the years to come,” she said. She noted unknown results of LIDAR testing in the area, and what it will cost to mitigate effects of climate change on infrastructure. She said she was against the fact the council had taken just one bid, and also that there hadn’t been a needs assessment conducted.
“There are a lot of things still out there that we haven’t discussed,” she said.
Sayne said she was aware there was much wealth and generosity in the community, but also said she felt the township was “putting a lot of people out,” who might be living on low wages.
“I’m concerned because there’s such a divide in this community, at the same time we have these incredible expenses,” she said. “I just think that we are polarizing, and I think it’s the way we went about this. Nobody argues - we all want to see an arena, but I think we’ve polarized the community in how we’ve done that.”
“We have a 50-year asset that we’ve enjoyed in Minden, that I think we need to be responsible as stewards of the public purse to reshape ... for the next 50 years in our community,” Devolin responded. “Minden Hills is growing at twice the provincial rate of growth. We’ve had very good financial stewardship here, we don’t have any external debt, not a dime. The province looks at communities like ours and our ability to carry debt, and it’s three times what we’re considering here, so in terms of, if you were going out to borrow money to buy a house and they said you could have $300,000 to buy it, and you bought a $100,000 house, I don’t think there’s many of us that would say it’s a stretch within our financial means to carry that. I guess I have a different perspective.”
Devolin said he considered the walking track and the multi-sports facility and community hub, which would be available year-round, “huge assets” for the community of people who are “aging well.”
“Am I sympathetic to those that financially are challenged in our community? Certainly,” he said. “Whether we do or don’t build this community centre, I think is not going to have a large impact. I think in terms of what we do, with social support and programs that we have we can double our efforts to do a better job, to supplement them ... And we show that when there’s times of need and we have identified challenges that we have, that our public steps up.”
Devolin noted the money Haliburton Highlands Health Services Foundation has raised and said he thinks the same will be true for the arena project.
“I think we can raise substantial money for this, as a public fundraiser,” he said. “I think that we can potentially raise a million dollars.”
“I think this is a significant part of making this community evolve into the sort of things that most of us that live here and those that we would like to attract to come to our community are enticed by,” he said. “Do we have other significant challenges that we have today and we continue to have, absolutely ... For this time, I think it’s the right project for our community.”
He said the project had seen two task forces, and that stakeholders and strong voices for and against the project had been involved, that the validation phase had been undertaken, that people had had the opportunity to voice their opinions, and that due diligence had been done.
“We may differ in whether we think this is the cornerstone of what we should do in our community,” he said. “I think this is part of good long-term public policy for Minden Hills.”
He acknowledged that the scale of the project meant it was not surprising it had been contentious.
“You’re never going to be able to do the perfect study to determine whether or not this is needed or not needed,” said Councillor Bob Carter. “You’re never going to be able to determine what’s the benefit of having this versus the cost of not having it. You’re not going to be able to do that. I understand there is a situation where we can’t do nothing. I don’t disagree with that whatsoever.”
Carter recalled growing up and playing sports but never using the town’s arena because he didn’t play hockey.
“Again, I know that not everybody is going to use the arena and not everything we build in the town is going to be used by everybody. There’s a lot of people who never go to the cultural centre, never go to the library, never go to Lochlin Hall, whatever it is. I’m not disputing that. It comes down to how much we have to take on as debt right now. If there’s fundraising and there’s people that are generous, let’s go out and get a commitment and see what that does to the numbers. I just don’t feel from my perspective that it’s responsible to be spending $12.9 million on virtually anything. If we were talking about housing, which is a great need in this community, I would have problems with that. It’s a lot of money and I just don’t see how we can do it when we’re spending the rest of the day cutting our budgets and finding out what roads we can have and not have. It’s my perspective.”
“You’re absolutely right, we have to do something,” said Sayne. “Totally agree with that. I just think that we’re not listening to our community like we could be.” Sayne reiterated comments from earlier budget talks that day in which she said she didn’t feel council was addressing other concerns.
Mark Coleman, director of community services, read some of the responses from a survey that 481 residents took, noting that residents were in strong support of doing something with the arena.
“We got a strong sense from the open house that people wanted more, not less and that moves this community forward to being a modern community for the next 30 or 40 years,” he said.
In his report to council, Coleman listed 10 potential implications of deferring the renewal project for another year or two including: staffing levels, grants that had been applied for, if approved, may not be able to be carried forward or available in the future; there was a risk of higher interest rate for financing; a community fundraising campaign in support of may be affected; ice and hall rental revenues would need to be adjusted back to 2018 levels with some loss, as some events/groups have already made arrangements to shift to alternative locations for summer/fall 2019, and the arena ice plant would require significant equipment maintenance and replacement at a cost of $225,000 to maintain safe operations, “therefore utilizing significant funds from a reserve. This does not prevent a system failure in the event of major brine leak in the floor or header pipe.”
Should council decide to change the scope of the project, Coleman wrote, an updated design, validation report and budget would need to be developed and presented to council for approval, causing the project schedule and completion timelines to be significantly shifted into 2020 or 2021, and a phased project would result in higher overall project and borrowing costs upon completion.
“The work to date of the task force, consultations and feedback suggest that the option ‘to do nothing’ is not a viable option for the community and that the community desires without further delay, a renewed full size multipurpose facility,” said Coleman in his report. He encouraged council to approve the recommendations.
“To do anything otherwise, staff would strongly recommend that a decision be deferred until council seeks further legal counsel,” he wrote.
The current second draft of the 2019 community services department operating budget is $865,325, but in his report, Coleman said any lengthy deferral, reduction or change in scope of the project would result in the operating budget being $1,091,600 with the addition of ice plant repairs to be offset from a reserve and an engineer inspection report pending quote.
Former councillor Jeanne Anthon and arena task force member Diane Peacock, who were in the audience, led a round of applause after hearing the vote in favour of the project.
Council will discuss financing the project at a third round of budget talks to happen in March.