The City's New Multiplex

In response to editorials posted in our local newspaper regarding the $100 million multiplex. The posted letters make it sound like city council has not thought through the situation or have considered input from residents of the city. Granted a plebiscite on the borrowing issue would have given a definitive answer, but with voter turnout being anywhere from 10 to 30 percent of the eligible population, the answer would not have been any more representative of the population than any of the polls already conducted. In addition, the plebiscites results that were in favor of proceeding with multiplex projects, resulted in substantially higher tax increases than what is being proposed in Grande Prairie. Nevertheless, there are other issues and concerns that were raised in the editorial which I’ll try to address:

Responses from Residents
The City of Grande Prairie conducted a poll last year looking for public response for building the facility which was estimated between $70 to $100 million. Of the 667 respondents, 96.5% were in favor of building the facility immediately. This is consistent with the dozens of people that I have been talking with personally on the issue. The number one comment that I get about the facility is that we need to proceed with it. The public wants this facility to be built without scaling back on features.

The $100 Million Price Tag
Admittedly, the cost of the Aquatics Multiplex is higher than expected. One resident in twenty has told me that they are concerned that the cost is out of line. I believe the public is unaware of the ever-increasing cost of commercial construction. The price of steel and concrete has been rising at an incredible rate. In addition, labour costs for commercial buildings are remaining at high levels due to the demand for commercial construction in Alberta. Commercial construction has not seen the same slow down as residential construction.

The province of Alberta is catching up on an infrastructure deficit that will last for several years, consuming resources all around us. If you just look at the projects in Grande Prairie, you will note some very large commercial buildings in the works: Futureshop, Best Buy, Walmart, schools, hotels, City Service Centre, Wapiti Dorm, the hospital ($600+ million), 3rd Firehall, and of course, the Multiplex. These are the major projects, but there are still many more in the city that will be built in the next year. In any case, the City will be focusing efforts on any additional grants that can help offset the costs and lessen the burden on Grande Prairie. Since the tender announcement, we have spoken to members of the Provincial Government who have indicated that they will consider our request when they look at their upcoming budgets.

The Tender
It is really unfortunate that we only received one tender on a project of this size. The dilemma that council faced was not only an $800,000 penalty for not awarding the tender within 30 days, but that we have very few options with only one tender. If council chose not to award the tender, it would be unlawful for us to re-submit the request without substantially changing the design. A change of design would mean more delays and possibly higher costs or a loss of features. For this project alone, every delay has cost the taxpayers of the city millions of dollars. A form of this project was originally planned to be in construction by 2005 costing the city less than $50 million, which would have put us in line with other multiplex projects in western Canada. A 2007 start would have cost about 20% less than our current costs and/or included a third field house. It is uncertain what another delay would cause, but we definitely wouldn’t have seen the same project constructed.

The only bright side to having a single company providing a tender is that city administration was able to go back to the construction company and negotiate a savings of $6 million below the original tender.

The City’s Debt
Construction of the multiplex is costing the city approximately $60 million in debt which puts our City over $100 million in borrowings. According to the city Treasurer, our debt is still manageable at that level. When the city decides to borrow for capital projects, the debt is typically amortized over a 10 year period. In 2011, the city’s ability to borrow will be tighter, but as past debentures are paid off by 2012, more room will be available if the need to borrow arises. There are some who are concerned that if the economy goes into recession, we won’t be able to service this debt. My approach is to look at the worst case scenario. In the worst case, where our taxes are unable to manage the debt, we can be thankful of the Municipal Sustainability Initiative from the provincial government which has promised us about $14 per year for the next 10 years. That money has been granted to our city to be spent on any infrastructure projects that we choose. If the worst case were to become a reality, the city would seriously have to consider halting future projects and using this money to repay the debt.

Roads, Social Services and Other Infrastructure
There is a misconception that the city can either fund roads or social services or facilities. We need to get away from believing that by funding one area, that another service area will get cut. One of the major challenges on council is to balance the needs of the city as it grows. These needs are constantly changing and it is up to council to listen to its residents and respond accordingly. A city with beautiful roads and is able to fulfill all of the demands on its social service infrastructure (crime, fire, health care, violence, homeless, etc.), wouldn’t necessarily be an ideal place to live if it didn’t included recreational facilities to keep us all healthy and happy. Our ability to attract quality professionals into the city is also affected by what our city is able to offer them over other communities in Canada.

The fact is that our city taxes are being distributed in an attempt to provide the best balance possible for the residents of Grande Prairie. We can definitely use more tax dollars to keep up with the needs of the city. Grande Prairie is unique in that the cost of living, factoring in inflation, is higher than most communities in Alberta. After reviewing the budgets, it is my understanding that residents would be looking at a 5-6% increase annually with no increases in service levels. This works out to approximately $150 per year tax increase, keeping everything the same. The problem is that we need more amenities as the city grows. To keep up with growth, we need taxes to be increased about 8% per year until we can obtain taxes from other sources. Faced with the choice of $150 more per year for nothing, or $200 more per year to add services, as a taxpayer, I would choose to get something more for my money.

In terms of long term planning, council is looking at strategies to increase our commercial and industrial tax base in order to ease the burden on residents. This doesn’t mean that business taxes are going up. It means that we need to attract more industrial businesses to the city until we have a healthy proportion to help share the load. Residents of Grande Prairie can take a little comfort knowing that their taxes aren’t the highest in Alberta and fall within the provincial average. We can also take comfort in knowing that Canada faces a $100 billion road and other infrastructure deficit and that Grande Prairie has been relatively good at keeping the city’s needs below the national average.

If you have opinions on this topic, please feel free to comment. I'll try to reply to responses if necessary.