The City of Yorkton has found an alternative source of borrowing for its new fire hall which will save more than one million in interest charges.
"In April Council authorized administration to advertise and request financing proposals to borrow $7,500,000 over 15 years to fund the construction of the fire hall," explained Lonnie Kaal, Director of Finance with the City.
Kaal said they received four proposals from financial institutions.
However, the recommendation of administration was to go with a different avenue for funding."In January 2009 the federal government introduced a Municipal Infrastructure Lending Program for housing-related infrastructure with financing through CMHC. We initially thought a fire hall would not fit under this "housing" program but upon further investigation, discussion and application, determined that a portion of our project will apply. Any costs prior to the announcement of the program are not allowed and since we started the fire hall project in September 2008, costs related to pikes and foundation of some $760,000 have been exempted. We were able to have the architect design fees, demolition, relocation of utilities and other site work included in the application even though some of these costs were incurred prior to February 2009," explained Kaal.The project cost of the fire hall was just over $8 million, with the City qualifying for a loan of $7.3 million. Kaal said the difference of $200,000 could be absorbed by having only a half-year payment this year.
"The rate fixed for 15 years with CMHC under this program was 3.77 per cent," she added, although the rate was not guaranteed.
The CHMC option has a major cost saving, said Kaal.
"When considering the difference in rates, going with the federal program will save the City over $800,000 in interest over the term of the loan. When directly comparing 15 year fixed term loans the interest savings is over $1,100,000. Payments would be $646,100 versus $734,800," she said.
Council unanimously supported borrowing the money through CHMC.
