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East Ferris rejects debt burden for Cassellholme expansion

New finance options put capital construction debt back on municipal shoulders after Cassellholme fails to qualify for loan, province not paying all of its portion up front

The latest financing scheme for the long-awaited redevelopment of Cassellholme Home for the Aged was rejected by East Ferris at a special meeting of council Tuesday.

Both options provided by the board of management for the East Nipissing district nursing home put the debt burden on the backs of municipal partners, counter to the understanding East Ferris had for the past couple of years. The resolution can be found HERE.

“We were blind-sided on this one,” Coun. Terry Kelly said of the narrowed choices made known to municipal partners last week.

Kelly, a director on the Cassellholme board of management, said he’ll be attending their meeting Thursday to see if anything has changed. 

North Bay Coun. Chris Mayne, chairman of the Cassellholme board, said Wednesday they are in communication with Infrastructure Ontario about the situation.

Mayne said Cassellholme tried to borrow the money from commercial banks this spring but they didn’t qualify on their own. And he said Infrastructure Ontario, the provincial lending arm, is also “risk adverse” and wants municipalities officially linked to the debt.

He said North Bay council is dealing with the debt issue as well, as it covers about 81 per cent of the municipal share for Cassellholme, which could mean $1.5-million or so annually for 25 years depending on the final cost of the project. North Bay passed a resolution in 2014, Mayne added, stating it didn't want to carry the redevelopment debt either.

In October, Cassellholme received the provincial green light to tender the project adding 24 new long-term care beds while upgrading 240 existing ones. Bid results are expected soon but some “guestimates” based on current construction trends see the project hitting the $90 million mark.

Related story: Cassellholme expansion going to tend

The city is holding a special meeting of council tonight but it’s focused on a recalculation bill from Workplace Safety and Insurance Compensation Board, Mayne said, noting they are facing an unexpected $800,000 hit to the budget.

Mattawa received the correspondence at its meeting Monday but didn’t take any action. Mattawa, Mattawan, Papineau-Cameron and Calvin townships plan to exit the Cassellholme partnership to support the Algonquin Nursing Home instead.

Mayne said the “exit agreement” has them paying their portions of the final redevelopment bill when it’s completed and then discontinuing operational support.

Based on a per capita formula, East Ferris is the next largest contributor at about 8 per cent while Chisholm, Bonfield and South Algonquin make up the balance of municipal contributions.

Jason Trottier, East Ferris chief administrative officer/treasurer, has been working on the Cassellholme redevelopment file since 2012 and gave council an overview of the situation.Trottier said municipalities haven’t wanted the debt burden of the expansion all along and in 2017, Cassellholme had to get legislation changed to allow it to take on debt for redevelopment.

Nipissing MPP Vic Fedeli was instrumental in getting that done, Mayne said.

But Cassellholme, due to its fiscal situation, doesn’t qualify for this level of debt, Trottier said. “Basically, their balance sheet isn't in a strong enough position to borrow on their own.” 

The choices presented to East Ferris include taking out its own loan or guaranteeing a Cassellholme loan with a letter of credit. Each move reduces the municipality’s capacity to borrow, Trottier said.

“Both options are not really good for us,” he explained, noting that the municipality has several capital projects of its own that will require debt.

“We're going into budget (discussions) ourselves,” he said, “and we have some decisions to be made, we're looking at our own facility (administration office), we have the medical centre, we got the roof truss repairs of the arena. So there's some big-ticket items. And without knowing this one, it makes it tough for us to proceed.”

The impact for East Ferris, under the previous estimate for a $55 to $60-million project would have been about $3 million total (if the province paid its share up front). The municipality was preparing for a $150,000 annual levy on top of the operating levy.

But Trottier said the province isn’t providing its full share up front as hoped, which requires Cassellholme and the municipalities to cover that portion as well. This more than doubles the potential debt load for Cassellholme and the municipal partners, he said.

Trottier also noted that the East Ferris resolution of support provided in 2017 requested financial details and business plan for the project that were never provided. “We haven’t seen any of that,” he said.

Kelly said he has no problem with the municipality contributing to the district nursing home operating costs but not the debt burden of capital construction.

“This makes no sense,” he said about the province not covering its full share upfront.

Mayor Pauline Rochefort said she believes Cassellholme is “innocent” in regard to the latest circumstances and said Nipissing MPP Vic Fedeli was also surprised with the information.

Fedeli’s office provided a comment to attribute to the Nipissing MPP on the situation Wednesday: 

“We have recently become aware of Casselholme's interpretation of financing for their new long-term care facility and are investigating their concerns. It should also be noted that we recently announced that Cassellholme is receiving an additional provincial investment of $10,637,513 helping them build 24 new spaces and upgrade 240 spaces,” Fedeli said.

Rochefort said the East Ferris resolution rejecting the options, with a preference more aligned to their 2017 resolution, should help the board with its discussions with the province.

Coun. Erika Lougheed said she is concerned this is the first of many downloads of debt burden from the province to municipalities over the next little while.“It seems like a larger level of government can handle that kind of money on such a short amount of time,” she said.

Lougheed, the New Democrat Party candidate for Nipissing in the next provincial election, said Cassellholme should be “in the hands of the Ontario government, not us.”

Mayne said the province covers about 70 per cent of Cassellholme’s $22-million in annual operating costs with residents providing 15 per cent (additional fees for private rooms, etc.) while municipalities cover the remaining 15 percent.

He said the province’s up front payment of the redevelopment project, initially reported as $10.1M but could be as low as $6.5M after the program was capped, would go against the total, which isn’t known. 

Initial bids on the “phased request for proposals” are not expected until January and they plan to work with a shortlist of bidders to see if they can reduce the costs. Final tender recommendations would go to the province for approval in the spring, he said.

Reluctant to state a potential cost so it doesn’t impact bid submissions, Mayne said he could do some calculations on the high-end “guestimate” of $94M for discussion sake.

After the province’s up front portion, he said that would leave an $84- to 88-million mortgage on the redevelopment which, based on historically low interest rates, would be about $4-million annually for 25 years.

The province would kick in about $2.1M annually with the municipalities covering almost $1.9M. Based on the 81 per cent figure, North Bay is looking at $1.539M annually and East Ferris about $152,000 annually, he said, while noting the concerns about who carries the debt is the main stumbling block at the moment.

Dave Dale is a Local Journalism Reporter with LJI is funded by the Government of Canada.

Dave Dale

About the Author: Dave Dale

Dave Dale is a Local Journalism Initiative reporter who covers the communities along the Highway 17 corridor Mattawa to West Nipissing. He is based out of BayToday
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