Baked into the city’s 2024-27 capital budget is $124.4 million in new debt the city is slated to take on in 2025.
Unanimously approved by city council on Dec. 19, the city’s 2024-27 capital budget totals $877.2 million, which averages out to $219.3-million annually and exceeds the 2019-23 annual average of approximately $160 million by 37 per cent.
The boost in infrastructure spending is aimed at addressing the city’s infrastructure gap, which has become well-established in recent months via a series of municipal reports.
“There’s an historic underinvestment in facilities obvious to anyone who’s been in them, so we’re trying to right that ship as well as deal with the linear infrastructure we know is important too,” city corporate services general manager Kevin Fowke told Sudbury.com.
“Not all projects are created equal. Some are great candidates for debt. They promote this concept of intergenerational equity in which those who benefit pay, and you get more done.
“You stretch your dollar further in an area when inflation in construction prices exceeds the interest rate that you would be using.”
For the past year, construction price increases were around nine per cent, while the previous 12-month period saw construction prices jump by 17.2 per cent.
The city’s added debt load of $124.4 million includes the following:
- $15.7 million for the Pioneer Manor bed redevelopment additional request for funding
- The Pioneer Manor bed redevelopment project jumped in price by 42 per cent to almost $93 million earlier this year. The project consists of the construction of a five-storey, 160-bed wing at the city’s long-term care facility on Notre Dame Avenue. The net bed expansion will be 11, bumping Pioneer Manor's total bed count from 433 to its new 444.
- $52.7 million for community safety station revitalization
- This revitalization of fire/paramedic stations encompasses Phase 1, in which new stations are being built in Garson and Minnow Lake, and the Val Therese, Long Lake and Van Horne stations are being renovated.
- $25 million for the College Street underpass
- The city’s oldest bridge, the 74-year-old College Street underpass, which ducks under three sets of Canadian Pacific Railway tracks, is slated to be rehabilitated. Mayor Paul Lefebvre has requested staff to seek federal funding for this project.
- $15 million for the Frobisher salt/sand dome
- This includes the construction of a new salt/sand storage building at the Frobisher public works yard.
- $16 million for Vermillion system water treatment plant upgrades
- This upgrade is a cost sharing project with Vale.
Municipal debt has ballooned in recent years, from $18.98 million in 2014 to its current 2023 year-end estimated total of $345.1 million.
Existing debt being pared down each year includes such things as $90 million for the as-yet undetermined arena project, $68 million toward “The Junction” (whose current incarnation is a $65-million library/art gallery project at Tom Davies Square), $30.8 million for Municipal Road 35, $60.35 million for the Pioneer Manor bed redevelopment project and $46.8 million for a biosolids plant. The balance includes various other infrastructure projects.
The city currently spends approximately 4.4 per cent of its own-source revenue on debt servicing, which in 2023 included $10.6 million in principal and $10.2 million in interest.
By adding on an additional $124.4 million in debt, the city’s share of own-source revenue spent on debt servicing will be brought up to approximately six per cent, which falls short of their self-imposed limit of 10 per cent.
The provincially imposed limit on municipal debt is a cap of 25 per cent of own-source revenue being spent on debt servicing.
For the city’s upcoming addition of $124.4 million in debt, it’s anticipated the city will secure an interest rate of 5.1 per cent and pay it back over the course of 30 years. By the end, including interest payments, the city is expected to end up paying $248.7 million on the $124.4 million in debt.
The hope, Fowke said, is the city will be able to secure lower interest rates, citing 5.1 per cent as their conservative estimate. When the city secured $200 million in debt in 2020 for major projects, a record-low interest rate of 2.41 per cent over 30 years was secured. Last year’s $103 million in debt was secured at an interest rate of 3.457 per cent.
Tyler Clarke covers city hall and political affairs for Sudbury.com.
