Funding model for event centre questioned

Nanaimo city council moves ahead with process for referendum.

A proposed event centre is expected to cost $70-million to build, won’t increase property taxes and no ongoing subsidy is required to operate it, according to the City of Nanaimo.

But not all residents and councillors were buying it during an open meeting last week.

The City of Nanaimo released its financing model for a proposed event centre, which council approved along with three readings of a loan authorization bylaw that’ll trigger a referendum this March and a referendum question.

The city wants to borrow $80-million over 20 years, with $10-million for South Downtown Area utility services like a public road into 1 Port Drive, and $70-million for construction of the centre on the waterfront.

According to chief financial officer Victor Mema, no private enterprise has come to the city’s door to do the centre, so for the construction phase it leaves the city with the option to borrow. The debt service is expected to be $5.4 million and with a financing framework, Mema has said will not increase property taxes or require any sacrifice of programs and services. The city would set up two reserve funds for asset management and to cover the ups and downs of operations, like any deficits, so the centre will not require an operating subsidy going forward.

The city has not yet released its full business plan.

Debt will be paid with money Mema said is unallocated, including from the city’s community works fund and $400,000 in payment in lieu of taxes from the Nanaimo Port Authority. The city also wants to see the city’s hotel tax increased from two to three per cent, with one per cent of what’s collected from tourists going to pay for the event centre. It’s a move the city still has to discuss with the Nanaimo Hospitality Association, which allocates the dollars.

The largest amount of money – $2.5 million will come from the city’s strategic infrastructure fund, newly set up last year for future strategic infrastructure projects like this sports and entertainment centre. The reserve shuffled money from general revenue and saw 3.3 per cent in property taxes over four years.

Resident Jennifer Davidson questioned if there really isn’t going to be a property tax increase and a continued level of service. She’s skeptical, she said.

“I find it hard to believe when you take money out of things and put them into this brand new facility – $80-million dollars – how can we not have a tax increase somewhere down the road to pay for all these things that we are taking money from,” she said. “I question those figures, you know, which facility is going to be shut down to pay for it. I am not convinced that this referendum, this money thing that we saw tonight is really giving us the full picture.”

Resident Bill Manners said less than 40 days ago council created a new reserve fund for strategic capital projects and repayment of debt used for projects which he said was created by a 3.3 per cent tax hike and $700,000 a year cut from RCMP services.

“That to me is new taxes and it’s also a cut in services,” said Manners.

The city has previously said it’s reduced its budget estimate for the RCMP contract but it is not reduction in service or money to police.

Manners also said local programs are jeopardized.  Casino money, now going into the event centre, “was to address negative social impacts associated with gambling, so where is that money going to come from. It’s going to have to come from somewhere new,” he said.

Nanaimo city coun. Diane Brennan took issue with the framework.

The city will use money from its community tax fund for the project, of which it receives $4.3 million annually from gas tax transfers. She said a gas tax is from the federal government for infrastructure and becomes taxes.

“To tell us that spending the gas tax is not spending local tax money, it’s a shell game. That’s our money. That was negotiated with the feds to assist us with our yearly budgets to build and revitalize public infrastructure,” Brennan said.

She also pointed out that casino money was because municipalities wanted to counterbalance the affect gambling had in the community and is what the city has come to count on, because it’d go into general revenue and help with roads and “all of the other things that we need.

“We are trying to change the color or the character of the money but the character of the money is the same,” she said. “That is the local tax fund and we are spending it on a multiplex, on an arena, where as was demonstrated we don’t have the real solid facts on what kind of money is going to be generated there.”

Coun. Wendy Pratt agreed with Brennan and doesn’t believe the gas tax shouldn’t be used this way.  Coun. Ian Thorpe said  he will support the wording of the referendum and  borrowing bylaw because it’s needed if the referendum passes but he has concerns about the wording in the  motion about the funding model.

“I have absolute respect for Mr. Mema and our staff but to say that this project will not be subsidized, I cannot accept. It will require a subsidy at least for two or three years and if that money comes from other funds within the city that’s still a subsidy to me. It’s just moving money around.”

He said that the city states it wants a mix of public and private funding and that would be ideal he said, “but at this point we don’t have a major private investor and our private funding will come from, hopefully if this goes ahead, naming rights and some lease of floor space.

“That is not a significant amount of private investment. I think we need to be clear it’s a taxpayer-funded project.”

He also said the city can say there will be no tax increase, and that’s being done because the city is changing its borrowing threshold and down the road that will possibly have an effect on future projects.

Coun. Jerry Hong said he doesn’t want taxpayers to pay for it, but there isn’t a choice – it’s the only ability they have.

“In order to reduce the tax burden on the people we need more taxes so we need a bigger tax base. That’s what I hope this will help drive for us,” he said.

Council agreed to the proposed financing model for the debt servicing, approved the first three readings of a loan authorization bylaw and a referendum question that will ask residents if they are in favour of the city adopting that bylaw to borrow a sum of no more than $80 million repayable over a period of up to 20 years for an event centre that will include an ice arena and other related entertianment, cultural and recreational facilities.

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