Kincardine questions financing of medical clinic project
By Liz Dadson

Feature

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Kincardine council is reluctant to move ahead with borrowing money to pay for the Kincardine Community Medical Clinic addition until it has explored all options.
In committee-of-the-whole last night (Sept. 2), treasurer Brenda French outlined that the best deal for short-term construction financing is with Infrastructure Ontario, with an interest rate of 0.65 per cent, while the banks charge 2.25 per cent. However, for the long-term financing, over 10 years to pay for the $3-million cost of the entire project, Infrastructure Ontario's rate jumps to 4.18 per cent, while the rate for the banks is unknown.

Another consideration, said French, is the extensive paperwork required for an Infrastructure Ontario loan, compared to that required by the banks. Her preferred option was to apply for a 10-year term to borrow the money from Infrastructure Ontario, with a bylaw and motion considered immediately.

Councillor Kenneth Craig said the banks require less paperwork and are more in line with the municipality's structure.

French agreed, saying that if the municipality approves a bylaw to go with a bank, the money would be available in five days. Things are more complicated with Infrastructure Ontario, which then advances the money on the 15th and 30th of each month. She said the construction financing is done with floating interest rates until the building is completed, then the long-term financing kicks in.

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02/09/2009 11:38 PM

"Perhaps the treasury department thinks differently than private business," said Craig. "The rates are comparable, so I'd choose the bank option. I think we should borrow the money and move ahead with this project."

"I have no real preference for either option," said French. "For my workload, I would go with the banks."

Mayor Larry Kraemer suggested the treasurer see if the municipality can get that 4.18 per cent rate locked in for 10 years, starting now before the clinic is completed. "It's predicted that inflation is going to go up and so will interest rates. It would be a good idea to get that rate fixed now," he said.

Deputy mayor Laura Haight said the long-term financing is going to cost more, whether council locks it in now or later.
"I'm not sure if we're allowed to go ahead with the 10-year borrowing until the construction is done," said French.

"It takes time to apply (to Infrastructure Ontario) and get the money," said councillor Ron Hewitt. "Let Brenda (French) come back with a report on whether we can apply for the entire construction cost and lock it in now."

"So, we'd be locked in for 10 years?" asked councillor Randy Roppel.

"Yes," said Haight.

"I'd like to see a clause in there that allows us to pay it off earlier," Roppel said. "We're putting a burden on future councils."

Council agreed to have French check into the 10-year borrowing for the entire project, even though construction is not done. She will report back to council at its meeting Sept. 9.