The long-anticipated downtown Kamloops performing arts centre is one of two projects eyed in a pair of proposed $275 million loans. Opposing voters have until Sept. 13, 2024 to sign petitions.

(LEVI LANDRY / iNFOnews.ca)

YOU ASKED, WE FOUND ANSWERS

Kamloops voters are being asked for their approval as the City looks to borrow $275 million for new facilities, but pinning down just how that will affect pocketbooks isn't simple. City Hall sees them as essential as Kamloops grows, one being the long-anticipated downtown performance venue and the other a four-sheet ice rink.

They've been pinpointed as top objectives in the City's 2019 recreational plan, but voters who may be undecided or have already decided they don't want to be saddled with the millions in loans that come with them question how $275 million plus interest will be paid off in 30 years.

iNFOnews.ca tried to answer that question last week after checking with City officials. But some readers are still struggling with the complicated math. Reader Robert Mitchell asked us this question (edited for grammar and brevity):

The City of Kamloops says they are borrowing $275 million at 4.3% for 30 years. For math purposes, let's say 4%. This comes to $11 million in interest per year alone. Divide this amount by, taking the high side, 47,000 houses and you get an average of $234 per home in interest. This doesn't include principal. Now add principal: $275 million divided by 30 years and 47,000 houses. The principal is $195 per household per year. Now add them for a total annual bill per household per year and you get $429. Now of course interest will drop as principal is paid off, but I think you get my point.

The concept that a one per cent increase in taxes (average $25 per household the city says) for five years ($125 per household the city says) is not mathematically possible to pay the loan and interest. The city is relying on some voodoo economics in implying that this is possible.

We asked the City to respond directly to the reader's concern. This was the response from communications manager Kristen Rodrigue:

The math on the long-term debt servicing is not quite so straightforward. The revenue needs to consider community growth, varying home values, interest rates, mill rates, and other tax classes (i.e. the tax increase will apply to commercial and industrial tax classes as well). Currently, 1% property tax generates $1.34 million for the City. As the City grows and more homes and businesses are added to the tax base, 1% will provide increased revenue to the City.

From an expenditure perspective, we consider retiring debt, interest rates, and reserves. For debt servicing in our general fund—that is, annual payments from taxation revenue—we currently budget for up to $6 million a year, which is approximately 4.6% of our total revenue. As of 2024, we were only spending about $4.8 million per year. The other $1.2 million is put into a reserve to offset future borrowing costs and respond to volatility in interest rates. As interest rates drop and other debt is paid off, the reserve grows and generates interest, like a savings account.

The 1% x 5 years tax increase (which is equivalent to approximately $25 per year per household valued at $800,000) will increase our debt servicing budget to approximately $14 million per year by 2029. However, we don’t expect to incur any significant debt for these projects until 2031, so between now and then, the additional revenue the City collects will be put in a reserve that will generate interest and grow until it’s needed.

As the City’s debt servicing costs drop below $14 million again, the reserve will grow to once again offset future borrowing costs and respond to volatility in interest rates.

That answer didn't seem entirely clear either.

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What is clear is that drawing up a detailed plan for 30 years of loan payments is no simple ask. As Rodrigue's answer shows, there are several variables at play.

The reader question points to 47,000 taxpaying homes, which is rounded up from the 2016 census. But there have been more homes built in those eight years and there will be more in the 30 years as the Build Kamloops loans are paid off, meaning the debt load will be spread across more homes than the 47,000 counted in 2016. 

It also doesn't account for taxes beyond residential properties, ranging from small businesses to the Kruger pulp mill, all of which pay much higher taxes than homeowners.The City is likely to apply for grants from higher levels of government to help fund the projects, it's actively seeking private donations and eventual revenue could be put toward the debt once they're built.

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While the 30-year loans of course must be paid if approved, it will be up to this council and future politicians to decide just how much they feel property taxes will change to pay down the debt in the next three decades.

Those not convinced taxpayers should shoulder either or both of the loans have until Sept. 13 to sign a petition. Naysayers need 10% of the electorate, around 8,700 signatures, to deny the proposals. That could put the issue to rest, but it's more likely to trigger a referendum.

More information on the Alternative Approval Process is available on the City of Kamloops website here. City staff have also actively been responding to questions from the public on its Let's Talk page here.

Go here for more of our reporting on the proposed performing arts centre and multiplex.

To contact a reporter for this story, email Levi Landry or call 250-819-3723 or email the editor. You can also submit photos, videos or news tips to the newsroom and be entered to win a monthly prize draw.

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