Note to readers: I summarized my concerns at the end of my presentation to the Municipal Capital Borrowing Board when it met to hear an application for borrowing for a new Rothesay Arena in June of 2014, as follows:
So to conclude, Mr. Chair, members of the Board,
We don’t have the population to justify these facilities without working with Quispamsis.
We haven’t seen any feasibility studies or engineering studies or any benefit cost analysis evaluating available options.
We have no detailed operating cost impacts.
We have no plans for the families this project has and will displace.
The public doesn’t know the total [Capital or operating] costs or the tax rate implications.
Once again the Town is moving development along with incrementalism, sinking increasing amounts of money into a favoured project until Council is too embarrassed to pull the plug on a bad and unaffordable idea.
It sets a very bad example for the rest of the province when the wealthiest community in the province can borrow on the credit of the province for projects that are not justified by need nor are they reflective of best value for money in their execution and the Town has not done its homework before spending any money.
Members of the Board, this application should be tabled until:
- Rothesay makes a real business case for what they need backed up by service delivery benchmarks used by the Province and other Municipalities.
- That they consider the consolidation of existing plans for new facilities, we can’t justify or afford to do everything currently planned;
- That monies identified as contributions to the project from other sources including the RDC are publicly committed in the amounts indicated;
And that money such as the Federal gas tax fund, which is not new money, should be backstopped from other sources as use of this fund for other than basic transportation infrastructure represents a diversion of funds that will have to be made up as the infrastructure needs will remain.Thank you
If you’d like to read more, My full presentation begins here:
Presentation to the Municipal Capital Borrowing Board June 9th, 2014, Fredericton – Rothesay Arena and Community Centre(Field house) Project
The Town of Rothesay has an image of a well run town in good fiscal and financial position. But are we?
“The Town’s Consolidated Statement of Financial Position shows $7.7 million
in financial assets, $20.317 million in financial liabilities and a net debt of $12.542 million.”
The Town seems to be holding the line on operating expenses. But there are some worrisome signs. Protective services costs have increased at more than double the rate of inflation. Fire and police are consuming an ever increasing amount of our tax dollars at $28% of operating budget and I understand our new police constables are now paid more than the RCMP.
On the Capital side, our borrowing will double this year over last year. This years capital budget is $17.2 million an increase of $9.3 million, almost half of that is discretionary parks and recreation spending.
These trends need to be reversed if the town is going to maintain its reputation as a responsible financial manager. Given this trend, it is all the more important that the Town makes a strong business case for the spending before you today.
- From what I have seen, no case has been made for a New Arena. We don’t have the population to support it, based on the established service delivery benchmarks.
- This project is not a priority with residents, especially when the competing priorities of water & sewer & roads are considered. The existing arena makes a loss year over year because of declining use. Simply put, there’s less demand.
- This project duplicates elements of existing or planned infrastructure within the Town or adjacent to it in Quispamsis;
- This project is definitely not rationalized regionalization of services to residents, which I believe, is a goal of your Government;
- Even if a case could be made to move beyond the status quo, the Town has not pursued the obvious alternatives that would deliver the same services (ice sheets and field house) at substantially lower capital and operating cost to tax payers; as a result there isn’t a case for this project as the best value for taxpayers’ money;
- The Town’s 2009 Recreation Master Plan did not call for a new arena, it proposed renovation of the existing Arena for about $3.25 million, so where is this coming from?;
- The Town has not made its tax payers aware of the potential for a tax rate increase of 10% or more to fund this and other recent borrowings for recreational facilities within the Town. These include the Rothesay Common Project and this New Arena and Community centre or field house;
and, what should be a concern to the Capital Borrowing Board; the current assessment of the Town’s ability to service this debt is incomplete if it fails to consider outstanding requirements for basic Municipal infrastructure that are not included in the Town’s existing municipal capital plan but have become liabilities through municipal amalgamation.
BENCHMARKS NOT MET
The Rothesay Recreation MasterPlan outlined the benchmarks for population required to establish need for specific recreational facilities.
From that plan, a population base of 20,000 would result in a fully utilized Arena at 8,000 population, we would have a lightly used one. The population base required to justify outdoor natural ice surfaces is 5,000 per rink. Rothesay residents currently have one dedicated Arena and access to ice time for another within the town as well as access to two Arenas in the adjoining town of Quispamsis and multiple outdoor rinks.
By these standards, Rothesay should have a population base of between 25,000 and 30,000 people to establish a need for the new ice sheets that are proposed. Rothesay’s population of 11,947 clearly does not meet these population thresholds.
Another key element of this funding proposal is a Field House or community centre. The demographic benchmark for a Field House as referenced in the Town’s Recreation Master Plan is a population base of 25,000. Another benchmark this project does not meet.
PUBLIC SUPPORT NOT DEMONSTRATED
For its part, the public hasn’t signalled any great amount of support for these projects. I’ve read through the minutes of council meetings and I cannot find any record of delegations making presentations to Council or delivering petitions of support for this.
As for a new outdoor hockey rink, the Town’s Recreation Master Plan points out that through their 2009 consultations, a outdoor hockey garnered only 1.5% of the available votes from those polled, hardly a ringing endorsement for outdoor hockey from Rothesay residents. I can only imagine what that support would look like if residents were also aware that it could cost them the equivalent of $300 or more annually per household in new taxes to pay for these facilities.
STAND ALONE FACILITIES DUPLICATE OTHERS
The project before you also represents duplication. Elements of the $2.4 m Rothesay Common development, specifically, the planned Common’s outdoor artificial ice rink and services building are duplicated by the Arena project with its mused about outdoor hockey rink.
The town has not explained how it justifies two outdoor artificial ice rinks. Both of which compete directly with the Quispamsis open air rink, just as the proposed new arena will compete with the QPlex, two new Arenas that will struggle to pay their way. I would encourage you to have an assessment of the impact on nearby facilities as part of your evaluation. I have not seen where that has been done.
Building a 14,500 sqft outdoor artificial ice surface and services building on the Common and then building a new arena project that adds an outdoor hockey rink as two stand-alone projects only a mile apart, mean they will require twice the mechanical equipment than if they were side by side on the same site.
This arrangement means higher capital and operating costs and therefore doesn’t represent best value for money.
The duplication doesn’t end at ice surfaces, There are additions underway or proposed for schools in the town that include gymnasia, a key component of the Community Centre. Clearly, if the town does not have the population to justify a field house, it can’t justify duplicating planned additions to facilities in local schools any more than it can justify the duplication of other facilities like rinks.
NO FEASIBILITY ANALYSIS – CONSIDERATION OF ALTERNATIVES
3.The Town has not made a case with the public that they have looked at alternatives and that building a new stand-alone Arena is the lowest cost option. If there is a case to be made to move away from the status quo, then you need to know that the QPlex was designed and built to accommodate a second ice sheet.
Consolidation with the QPlex would mean both lower capital costs and lower operating costs. By not taking a regionalized approach, the Town of Rothesay is incurring unnecessary costs and is therefore wasting taxpayers’ money.
Rothesay should pursue cooperation with the Town of Quispamsis before proceeding with this application. Committing residents to fund a more expensive option than this deserves an explanation,. and a business case supported by hard numbers… I would encourage The Municipal Capital Borrowing Board to table this application until this is done.
RECREATION MASTER PLAN NOT BEING FOLLOWED
4. In any event, the Town’s Recreation Master Plan did not call for a new arena. After examining the Arena Building condition report, ADI indicated that a renovation of the existing Arena could be done for about $3.25 million. Why then are we now building a new one?
RESIDENTS DISPLACED BY DEVELOPMENT
The Recreation Master Plan also recognized that some apartment buildings were in the way and proposed that any apartment units displaced by the development of Recreation facilities could be replaced by adding them to the proposed new library on the site. This hasn’t happened.
Instead the buildings were bought by the Town and the Residents were evicted for half of the units which have already been torn down. Newspaper coverage has highlighted the limited options faced by residents. The political optics of this are simply terrible as we propose to build an ice palace at the cost of displacing some of our most vulnerable population. Whose interests are served when this happens?
Mr. Chair, I have here a letter on this subject that appeared in the Telegraph Journal:
(Letter)
Do you really want to bring the Province into the middle of this as a project enabler without a very strong business case and some demonstration of this as being in the public interest?
IMPACT ON TAXES – SUSTAINABILITY OF ONGOING BORROWING
5. At the last Council meeting on May 12, The Chair of the Finance Committee indicated that even with generous provision for revenue growth, the potential impact of the current round of borrowing for projects like the Arena and Rothesay Common projects, on the Town’s property tax rate was to move it from $1.19 to $1.30 per thousand of assessed property value.
This potential for a 10% tax hike has not made it onto the radar of Rothesay Tax payers. When it does, there will be significant push-back. To do this on the eve of a provincial election when the projects that may necessitate this tax hike will be facilitated by provincial funding, guarantee that this will become an election issue.
The Mayor announced at the beginning of the year that the Town had a balanced budget. That is incorrect. The Town of Rothesay has only managed to balance its $15 million operating budget. When its capital spending plans are considered, the Town has a $17 million deficit on revenues of $15 million. This cannot continue for long before we will be broke, really broke.
UNFUNDED INFRASTRUCTURE LIABILITIES
6. While I realize you may not want to challenge the judgement of Council on their priorities. But when those priorities ignore liabilities that are material to the longterm financial health of the town, then you do have a right to question them and you do have a responsibility to ask that they be quantified by the Town.
This year the Town proposes to spend about $8.4 million on recreation capital projects, all discretionary spending. This year the town has budgeted only $2.8 million on surfacing of streets. It is clear to anyone who has driven through Rothesay this week that this spending is out of balance. Worse than that, every pothole ignored doesn’t go away on its own, they simple get worse and costlier to fix, so the liabilities are mounting.
If you only consider Rothesay’s debt service ratio as a measure of affordability, you may conclude that the Town has room to borrow. You may be persuaded to conclude that Rothesay is in good financial shape. That is provided we increase taxes. The problem is I don’t believe you have a full picture of Rothesay’s liabilities especially as they reflect the Town’s obligations to provide basic municipal infrastructure particularly to the newly amalgamated areas including what is now referred to as East Rothesay.
The Council minutes of August 12th 2013 are illustrative on this point:
(From Council minutes of August 12th 2013) – Mr. Hennessy gave a presentation to Council. He had collected over 450 signatures… He was aware of fiscal restraint and associated costs with rebuilding roads but requested the current budget for chipseal be “banked” and no more chipseal be used…
“and the Town start a program of rebuilding the roads as funding is available. He shared some comments of area residents who expressed their anger and frustration over a perceived lack of interest from the Town in addressing the concerns and issues. “
Mayor Bishop thanked Mr. Hennessy for his presentation and noted the chipseal roads were inherited from the province at amalgamation and require very costly rebuilding.
There was a discussion around chip seal and it was observed that;
“minimal provincial funding was provided at amalgamation for roads and the funds were used for French Village Road; the inequity is not through the fault of Rothesay Council but previous actions by the province on development standards;”
The Town has not budgeted for the infrastructure shortfall from amalgamation. So the picture of Rothesay’s financial position, based solely on what it has borrowed to date fails to capture the full picture. In my opinion. Especially when these minutes of council are read.
So to conclude, Mr. Chair, members of the Board,
We don’t have the population to justify these facilities without working with Quispamsis.
We haven’t seen any feasibility studies or engineering studies or any benefit cost analysis evaluating available options.
We have no detailed operating cost impacts.
We have no plans for the families this project has and will displace.
The public doesn’t know the total costs or the tax rate implications.
Once again the Town is moving development along with incrementalism, sinking increasing amounts of money into a favoured project until Council is too embarrassed to pull the plug on a bad and unaffordable idea.
It sets a very bad example for the rest of the province when the wealthiest community in the province can borrow on the credit of the province for projects that are not justified by need nor are they reflective of best value for money in their execution and the Town has not done its homework before spending any money.
Members of the Board, this application should be tabled until:
- Rothesay makes a real business case for what they need backed up by service delivery benchmarks used by the Province and other Municipalities.
- That they consider the consolidation of existing plans for new facilities, we can’t justify or afford to do everything currently planned;
- That monies identified as contributions to the project from other sources including the RDC are publicly committed in the amounts indicated;
- And that money such as the Federal gas tax fund, which is not new money, should be backstopped from other sources as use of this fund for other than basic transportation infrastructure represents a diversion of funds that will have to be made up as the infrastructure needs will remain.Thank you