Municipal Sanitary Local Improvement on Baseline Road

Local improvement work is consistent with the requirements set forth by O. Reg. 586/06 under the Municipal Act. As such, associated risks to the Corporation are considered minimal.

Construction of a sanitary sewer on Baseline Road from 7th Concession Road to 8th Concession Road will result in the elimination of septic systems from approximately 65 properties with a mix of residential, commercial and manufacturing uses. Septic tanks contribute to water quality issues within the City’s watershed and ecosystem through the release of health endangering contaminants by infiltration and overflows to the storm sewers and ditch system. Should this project not proceed, the subject properties will continue to use septic systems and property owners will incur additional costs as aging systems are replaced by the owners. Furthermore, the existing septic systems that are not replaced will continue to age and increase the potential for contamination of the City’s storm system.

As the City has never before processed a local improvement on private property under Part III of O. Reg. 586/06, should Council choose to proceed with the recommendations of this report, a precedent may be set which would allow future projects of this nature to proceed accordingly. The Engineering Department is currently reviewing eight (8) similar sanitary local improvement projects for consideration over the next seven (7) years. As such, there is a financial risk in terms of funding and cash flow related to these private local improvements.

Extension of Repayment Terms to 20 Years

There are a number of financial impacts associated with the extension of a repayment period longer than ten (10) years. This would include such items as assessing the impact to City funding, the impact on available cash flows, and costs associated with the administration of the program, etc. The portion which remains to be funded, over time, by the taxpayer is in essence a loan with the City becoming the financing authority on a long-term basis.

In terms of cash flow, in today’s economic environment wherein interest rates are very low and affordable, it would be advantageous for a property owner to accept and maintain a 20-year repayable loan from the City. In contrast, where interest rates are initially higher and then fall over the repayment period, a property owner can choose a payout based upon the remaining balance outstanding. The same does not hold true for the city, as interest rates rise over the 20-year period, the City would be essentially forgoing interest revenue until the full balance owing is collected. In order to address this risk and to be consistent with Council’s direction, interest rates will be set going forward at the discretion of Administration with appropriate consideration to an appropriate risk premium to address the long term nature of the local improvement repayment.