The Buffalo Pound Water Plant Corporation came to Moose Jaw City Council on Monday night for approval for Moose Jaw’s share to borrow $55 million to complete its plant renewal project. 

The water treatment plant is owned by the City of Moose Jaw and the City of Regina, with Moose Jaw holding a 26 per cent ownership or $14.3 million for the loan. 

The Buffalo Pound Water Treatment Plant Corporation would be the entity taking out the loan. The City of Moose Jaw would be providing a guarantee to the bank for the $14.3 million. 

Another caveat is the interest rate. If the interest rate is 5.8 per cent or less, the city will execute the agreement. If it is above 5.8 per cent, the financial services department will return with a report to obtain further approvals from the city council.  

“While those funds are not required until 2024, with the recent rise in interest rates, we think it prudent to start looking to, in essence for a better term, book that money. Obviously, it would not be drawn down until 2024 when it is required,” said City Manager Jim Puffalt. 

The city administration’s position is that there could be opportunities to lend the money to the Buffalo Pound Water Treatment Corporation internally from reserves, noting that the city’s long-term investment funds have an interest rate of about six per cent. 

Providing a guarantee for the water treatment plant will draw down on the city’s debt limit immediately, despite the funds being used in 2024.  

As of June 30, 2022, the city has used $72.5 million of its $95 million debt limit. Of that debt, $25.7 million is related to previous borrowing for the Buffalo Pound Water Treatment Plant. The additional $14.3 million would be within the city’s debt limit, leaving Moose Jaw with $8.2 million available to borrow. 

With the funds expected to be used in 2024, the city’s financial services department is estimating that the city’s debt would be around $62.7 million, or $77 million once you add on the $14.3 million in new loans. It would leave the city with a remaining debt limit of $18 million in 2024. 

“Right now, that's well within our amounts, and in 2024, when we actually need the money, I think with the payments that we make, we're down to $77 million where our debt limit would be. So, we would still have room if something unforeseen should happen,” said Puffalt. 

The Buffalo Pound Water Treatment Plant renewal project is expected to cost $325.6 million. This includes $30.6 million for advisory and design services. 

The funding was coming from the Investing in Canada Infrastructure Program (ICIP) for $163.4 million from the federal and provincial government, $60 million in borrowing for the municipal portion required under ICIP, and $47.2 million in reserve funding from the Buffalo Pound Water Treatment Plant for a total of $270.6 million. 

When Graham-AECON submitted its lump sum proposal in March, the construction cost came to $295 million, which was $55 million over budget due to increased costs for materials, labour, and supply chain disruptions.  

The Buffalo Pound Water Treatment Plant plans to repay the loans through water consumption. Moose Jaw would see a rate increase of about 12 cents per cubic metre or an eight per cent volume rate increase to consumers if the loan is placed at 5.5 per cent.