Cranbrook council, staff tweak funding sources for industrial land development

Discussions over funding industrial development continues in preparation of five-year financial plan

Cranbrook city council made a resolution to move forward with a spending plan for deep utilities infrastructure on industrial lands formerly owned by Tembec during a special budget meeting on Wednesday.

The city has earmarked $2.5 million for the installation of those deep utilities next year, which will be sourced from a one-time chunk of dedicated road tax funding, the federal gas tax, and two infrastructure surplus funds.

An additional $2.75 million was also approved for shallow utilities, however, the funding sources were tweaked by removing a caveat that stipulated it must be repaid from a dedicated road tax to appease a few councillors with lingering concerns.

The unease stemmed from using dedicated road tax revenue to fund the repayment of the $2.75 million, which will be borrowed from a reserve fund for Moir Park development that currently contains just over $3 million.

Following the discussion, the resolution was tweaked to remove reference to using the dedicated road tax for $2.75 million repayment starting in 2023, while allowing council the latitude to identify and approve repayment funding sources that may become available over the next three years.

READ: Council, city staff debate future plans for former Tembec property

Ideally, the consensus around the council table, was that lease payments be used to repay the $2.75 million borrowed from the Moir Park Development reserve fund.

However, from an accounting perspective, the dilemma is that lease revenues from the industrial lands can’t be forecasted given the unknown amount of future agreements in place, if any, when the repayment plan starts in 2023.

“At the end of the day, we can’t identify lease revenues for 2020 and beyond because we don’t have leases in place now; our leases run out at the end of 2021,” said Councillor Wayne Price, who expressed his desire to see the industrial lands development funded by lease revenue.

Councillor Norma Blissett bluntly opposed any spending for shallow utilities until an agreement with a company or investor is in place.

“I’m not worried about repaying it, I’m worried about doing the project in the first place,” said Blissett. “I’m in agreement somewhat of funding the deep utilities, but I’m not in agreement with funding the shallow [utilities]. That was to wait until we have a proposal for the land, so I don’t want to see this go ahead.”

Ron Fraser, the interim Chief Administrative Officer, said there are some elements of shallow utilities development that can be done in phases. Fraser later added that even with the approval in principle of budgeting the $2.75 million, council will have the opportunity to have their say on specific project spending requests.

“The idea would be, if we have demand, especially in the more middle portion of the parcel of land, then we will come to council and say there is sufficient demand now to warrant putting the shallow utilities in and putting the gravel road in,” Fraser said. “Because if someone wants something in the middle areas, we pretty much have to build a road and connect the shallow utilities, but we don’t really need to do that until there’s evidence of demand.”

Mayor Lee Pratt expressed confidence that there will be a number of lease agreements in place by 2023, which would generate the revenue needed for repayment.

“The whole concept of this was, we get inquiries all the time for investment ready land, and we don’t have any,” said Pratt. “So the idea here was, we have 100 acres that, if we get it investment-ready, we are at the top of chain rather than the bottom.

“…Right now, we have two prospects in the loop that are looking to invest there, and if they do, they’re not going to wait for another year or two years for us — they’re going to start planning their buildings and everything as soon as they make that announcement. We have to be in the ground, ready for them to hook up.”

Pratt added that he is still in talks with an unnamed investor who expressed interest in potentially fronting the $2.75 million.

Councillor Wes Graham cautioned that the development of the land is a long-term investment.

“We have to look at it that way, and it’s a long term goal. It’s not going to fill in a year — if it does, great,” he said. “But I’m not naive in thinking we’re going to have that thing exploding in a year. We have to look at it in a s systematic approach in that we have readily available land.”

Council also passed a resolution for a $200,000 budget item for industrial land remediation. According to a staff report, discussions with a consultant indicates that a low level of remediation is required and that there hasn’t been any gross contamination encountered beyond some minor metals and chloride.

Additional items included a $20,000 budget resolution for a BC Hydro design and a $130,000 resolution for a Certificate of Compliance for the industrial land site.

A Certificate of Compliance is needed to issue a development permit, which will allow for a building permit, according to city staff.

While the plan has been to lease the lands to generate revenue, the door is also being left open for the possibility of land sales, according to Councillor Ron Popoff.

The city purchased 100 acres of industrial land from Tembec last year for $3 million. Three contracts were awarded last year for consultants to complete an environmental assessment, a civil and transportation engineering report, and a geotechnical and hydrological assessment.

READ: City will pay $3 million for Tembec land: Mayor

A larger scale development plan that included a proposed $8.8 million item for shallow utilities was discussed and eventually dropped at an earlier budget meeting, and replaced with the current $2.75 million option.

The resolutions will be included in an upcoming draft five year financial plan that will be available for public comment between Dec. 10-20. It will then be presented to council as the 2020-2024 Five Year Financial Plan Bylaw for three readings in January.

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