Council Report: WEST SHORE RCMP DETACHMENT EXPANSION PROJECT FUNDING
Report discussing options for debt financing the expansion of the West Shore RCMP detachment through a subregional service with the CRD.
TOWN OF VIEW ROYAL COUNCIL REPORT
TO: Council
DATE: November 9, 2023
FROM: D. Christenson, Dir. Finance & Technology
MEETING DATE: November 21, 2023
WEST SHORE RCMP DETACHMENT EXPANSION PROJECT FUNDING
RECOMMENDATION:
THAT a letter be sent to the Capital Regional District (CRD) requesting that the CRD establish a subregional service for the purpose of funding a joint capital project up to $103 million.
PURPOSE:
To consider information relating to the Joint Police Facilities Steering Committee’s recommended option for debt financing the West Shore RCMP detachment expansion infrastructure project.
TIME CRITICAL:
The owners of the West Shore RCMP detachment must determine and establish the financing structure for the proposed expansion project before it can begin. View Royal co-owns the facility with the City of Langford and the City of Colwood, and each municipalities’ Council will be required to confirm its decision regarding the choice of financing structure for this project.
EXECUTIVE SUMMARY:
View Royal’s 2023-2027 Financial Plan, adopted by bylaw on May 9, 2023, includes $186,720 for View Royal’s 15.56% share of the $1.2 million costs required to advance the West Shore RCMP detachment expansion project to the design validation stage as well as the cost of borrowing $12.8 million to fund View Royal’s share of the construction, and associated debt service costs of approximately $1.05 million in each of the subsequent years for the anticipated 20-year term. The Joint Police Facilities Steering Committee, comprised of personnel from all three municipalities, have met regularly to discuss, among other things, how best to structure the financing of the estimated $82.4 million project.
The Steering Committee recommends that the Communities seek the creation of a subregional service with the CRD, as this option is significantly less complex, requiring only one electoral approval process and one borrowing timeline. Provincial legislation requires that the service establishment bylaw include a maximum dollar amount relating to the cost of the service. As the estimated costs are preliminary at this time (+/- 25%), staff recommended setting the maximum amount for the new service at $103 million.
Compared to the option wherein each owner municipality obtains financing for the West Shore RCMP detachment expansion project independently, financing the project through a subregional service ensures the equity of burden to constituent taxpayers over the long term of the debt, and shifts the tax increase from the general municipal line to the CRD line on the property tax notice.
BACKGROUND:
Jointly owned by the City of Langford, City of Colwood, and the Town of View Royal (“The Communities”), the West Shore RCMP detachment is located at 698 Atkins Avenue in Langford. The existing detachment is approximately 37,000 square feet, comprising two largely separate, but connected facilities; one built in the 1960s (approx. 10,600 square feet), and a newer structure built in 1999 (approx. 26,400 square feet).
Investments have been made in the current detachment, but the facility is nearing capacity, especially given the growth that the West Shore has experienced and the growth that is projected in the years to come. RCMP projections indicate the need for increased space in the next one to four years. As the communities continue to grow, so too does the need for specialized and diversified policing services, increased use of technology, modern facilities, and a larger staff contingent to maintain current policing level of service in the region.
The Chief Administrative Officers (CAOs) of the Communities have worked together, along with the mayors, as part of the Joint Police Facilities Steering Committee to move this project forward. Among the many complex factors associated with a capital project of this magnitude having this many stakeholders is how to structure the debt financing of the estimated $82.4 million project. The Communities do not have sufficient reserve funding and each community has indicated that debt financing will be required for this capital project.
View Royal’s five-year financial plan included 100% debt financing for its share of the costs ($12.8 million), with future annual debt service payments requiring the equivalent of approximately a 1% tax increase (based on 2022 tax revenue) for the 20-year term – about $1,050,000 annually.
View Royal’s 2023-2027 Financial Plan includes further background information about the project and the following relevant excerpts are attached to this report:
- Project Summary C-136 West Shore RCMP building expansion-design validation, and
- Project Summary C-137 West Shore RCMP building expansion.
DISCUSSION AND ANALYSIS:
Municipalities in British Columbia have the option of borrowing through the Municipal Finance Authority of BC (MFA). The MFA pools long-term borrowing needs and maintains the highest credit rating possible (AAA), and as a result, the MFA negotiates low interest rates and favourable terms, saving BC taxpayers millions of dollars each year in debt repayments.
For the West Shore RCMP building expansion project, the Steering Committee narrowed possible financing options down to two:
- Each of the three communities (View Royal, Colwood, and Langford), determine their own financing structure independently.
- The three communities establish a subregional service through the CRD to create a joint financing structure.
Both options assume that financing would be obtained from MFA, facilitated through the CRD, as the MFA offers the most advantageous financing in either case.
A subregional service is a service provided by a regional district where two or more jurisdictions are served, in this case the City of Langford, City of Colwood, and the Town of View Royal. The boundary of the subregional service would include the entire municipal area of each of the three member municipalities.
To establish a subregional service, the CRD must adopt a service establishment bylaw. One of the requirements of that bylaw is to include the maximum amount that the service may cost (also the maximum amount that may be borrowed to pay for the service). Currently, the preliminary capital cost of the West Shore RCMP detachment expansion is estimated at $82.4 million; as this is a preliminary cost estimate, it is recommended to consider an additional contingency factor of 25% bringing the maximum estimate to $103 million.
Staff recommend establishing the service with a maximum dollar amount of $103 million; however, it is important to note that while this is the maximum that could be borrowed, it does not mean the full amount will need to be borrowed. The Communities continue to advance the work to arrive at a point where a more accurate cost is known. Given the timelines required for the establishment of the service, approval of the loan authorization bylaws, and the time required to better understand the cost estimate as well as the need to ensure this project keeps moving forward in a timely manner, it is recommended to proceed with requesting the service establishment with a $103 million maximum. To select a lower maximum amount increases the risk that steps in the borrowing approval process would have to be repeated, further delaying completion of the project.
Analysis of the risks and benefits for each of these options include the following:
| Attribute | Option 1: Independent borrowing | Option 2: CRD subregional service borrowing |
|---|---|---|
| Complexity | More complex, requires greater collaboration between municipalities to coordinate messaging and public engagement, may give rise to implications that differ between constituents. | Less complex, requires collaboration between municipalities and CRD for messaging and public engagement, however simpler to explain because implications are the same for all constituents. |
| Electoral approval of borrowing | Each municipality will seek electoral approval independently; there is some risk that electors in one or more of the municipalities will not approve, effectively preventing the project from proceeding until a remedy is found. | The CRD will hold one electoral approval process for the region comprising View Royal, Colwood, and Langford. Risk of non-approval is that of the project as a whole, not specific to any one of the three municipalities. |
| Timing | Project cannot proceed until all three municipalities have obtained electoral approval independently; a delay by one or more municipalities will delay the project for all three. | The CRD will hold a single electoral approval opportunity; project will only proceed if electoral approval is obtained. |
| Debt service cost recovery | Principal and interest repayment is the responsibility of each municipality separately and would appear in their property tax notice either included in the general municipal tax or identified separately as a municipal tax for this purpose. | Principal and interest repayment is the responsibility of the CRD subregional service and would be included in the CRD requisition and identified as such on the property tax notices for all taxpayers in each of the three municipalities. |
| Responsiveness to shifts or changes in basis of apportionment | Municipal debt servicing is typically funded through property taxes, based on assessment values. Taxpayers in municipalities that realize an increase in assessment values over the term of the debt will proportionately pay less per $1000 of assessed value than municipalities that don’t experience the same growth. | Subregional services may be apportioned to participants in several ways, including assessment values, population, or some other objective metric deemed to be equitable. The proportionate share of costs will adjust for each municipal participant according to the established formula throughout the term of the debt. |
SUSTAINABILITY/CLIMATE CHANGE IMPACTS:
There are no substantial implications for sustainability or climate change impacts associated with the approval of the recommendation.
FINANCIAL IMPLICATIONS:
If the CRD establishes a subregional service for the purpose of financing the West Shore RCMP detachment expansion project, as recommended, the future debt service costs could be collected by the CRD through its requisitioning process as legislated by the province. This means that taxpayers would see an increase in the Capital Regional District line item on their property tax notice, rather than on the general municipal tax. More importantly, shifts in the selected basis of apportionment (such as property assessed values, population, or a combination of both) between View Royal, Colwood, and Langford will automatically adjust the amount allocated to the municipal participants each year to collect sufficient funds to service the annual debt costs.
Currently, the operational costs associated with the West Shore RCMP detachment are shared between the owners based on 50% assessment values and 50% population for each of Langford, Colwood, and View Royal. It is expected that incremental municipal taxation would be required to fund the increased building operating costs of the facility expansion; however, an estimate of the costs is not available at this time.
ALTERNATIVES:
If Council does not agree that View Royal should participate in a CRD subregional service for the purpose of financing the West Shore RCMP detachment expansion project, it should direct staff to write letters to the City of Colwood and the City of Langford to indicate that the Town View Royal will undertake the funding its share of the West Shore RCMP detachment expansion project independently.
CONCLUSION:
The establishment of a CRD subregional service to finance the West Shore RCMP detachment expansion project represents a financing structure that ensures the equity of the burden to the constituent taxpayers over the long term of the debt, shifts the tax increase from the general municipal line to the CRD line on the tax notice, and reduces the risk that the project is delayed or cancelled because the electors in one or more of the owner municipalities do not approve the financing.
Staff from all three owner municipalities have collaborated on this report to ensure that the request to each of the three communities’ Councils in November 2023 contain consistent information.
| CONCURRENCE: | Initials | Comments |
|---|---|---|
| Interim Chief Administrative Officer | SJ | Recommend approval. |
| REVIEWED BY: | Initials |
|---|---|
| Director of Corporate Administration | SJ |
| Director of Finance | DLC |
| Director of Development Services | Not requested |
| Director of Engineering and Parks | Not requested |
| Director of Protective Services | Not requested |
ATTACHMENTS:
- Project Summary C-136 West Shore RCMP building expansion-design validation, and
- Project Summary C-137 West Shore RCMP building expansion.
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