BUILD KAMLOOPS – How the impact on taxes will work

Questions and answers between ArmchairMayor.ca and City communications manager Kristen Rodrigue on the Build Kamloops proposal:

QUESTION 1:

As I understand it, the additional $25 per year tax would actually be compounded, so that in year two the taxpayer will pay $50 more than at the start, in year three $75 and so on. At the end of year five, the cost per taxpayer would be $125 more per year until the debt is paid at year 30. Am I correct? And does this pay for the entire $275 million borrowed?

ANSWER:

The actual impact to taxes required to service this new debt is a 1% tax increase per year for 5 years, which is approximately $25 more per year for the average household. So based on today’s tax rate, you will be paying $125 more per year in 5 years ($25 per year x 5 years) and that amount will remain in your taxes in perpetuity (just like we’re still paying for any increases that were included in 2022 or 2023 as we pay our 2024 taxes). Each year we look at the tax rate as a % or $ increase over the previous year, so what we’re outlining is what portion of your annual tax increase for the next 5 years will fund this program. This is the same model that was used for the successful Tournament Capital project borrowing.

We currently budget for (collect taxes for) up to $6 million a year, which is approximately 4.6% of our total revenue. As we add the 1% each year, that budget will gradually increase to $14 million by 2029, in time to take out the first significant loan for Build Kamloops. We need permission now to take on the borrowing (in order to advance the projects, seek grants and donations, etc.) but we don’t actually need to borrow any significant amount until the facilities actually open. So we are able to build our borrowing capacity as we build these facilities and then take out our loan without any large single year tax increase.

Here is a graph to outline what I’m talking about.

The green bars are our historical and projected payments based on current debt. 2024 is marked with a star. The yellow bars demonstrate the additional debt servicing required for this $275 million, as we incur it. The red line is our current debt servicing budget – this is the amount of tax funding we collect each year to make our payments. While we currently budget for $6 million dollars per year in debt servicing, we haven’t needed that much since 2017. The difference between what we collect (the red line) and what we pay (the bars) is invested to offset future borrowing costs (like the spikes we see between 2031 and 2037) and respond to interest-rate volatility and other market changes. This position will strengthen even more as interest rates drop.

Finally, we have other debt retiring over this same time period that also frees up debt servicing funds that will be applied to this. (As the green bars go down, the yellow bars take that space).

So the 1% per year is the amount we need to add to our current budget to afford this new debt. Therefore the only additional funding required from residents to fund this program is approximately $25 per household per year for the average household. The alternative would be to apply a one-time large tax increase when we borrow the money, but a moderate, gradual increase is easier for most people to accommodate, hence the reason Council is introducing a small increase each year for the next 5 years.

And yes, this will pay for the entire $275 million borrowed.

QUESTION 2:

Is the plan to present the various projects for approval in one counter petition/ alternative approval process, or separately for each project. eg. would the PAC be separate?

ANSWER:

The draft bylaws were presented to Council on June 25 as two separate loan authorization bylaws:https://kamloops.civicweb.net/document/186333/REP_BK%20update.pdf?handle=6A70182B3DC445D182406BB1338999BF

The borrowing bylaws for this AAP are currently with the province for approval.

Two loan authorization bylaws will mean two elector response forms / two concurrent AAPs.

QUESTION 3:

How will the APP forms be distributed?

ANSWER:

The forms will be available at City Hall for sure, and perhaps online as well. These details will all be presented to Council and the public before the AAP launches.

QUESTION 4:

How many parking stalls are included in the new plan for the PAC?

ANSWER:

The design includes approximately 125 parking stalls. This is in addition to the 450 stalls announced as part of the Cancer Centre project, which will also increase the parking capacity in the downtown core.

QUESTION 5:

What is the expected deadline for the AAPs? Will the 30-day countdown be during the summer months?

ANSWER:

We anticipate the 30 day window to fall sometime between mid-August and the end of September, depending on when we hear back from the province. So the deadline will be in September. Once we have statutory approval, we will be bringing another report to Council outlining the advertising dates, the deadline for receipt of responses, the estimated number of electors, and the elector response form, as well as the process for submitting that.