Councillors vote 8-5 to move pricey long-term care home project forward

County councillors have indicated they will direct staff to move forward on the new long-term care home project at the H.J. McFarland Home site in Picton to gain benefit of funding though the province’s construction funding subsidy top-up.

At Thursday’s committee of the whole meeting, councillors voted 8-5 in favour. Ratification goes to council’s regular meeting May 21.

Councillors Phil Prinzen, David Harrison, Roy Pennell, Corey Engelsdorfer and Chris Braney voted against, countered with seeking private investment/builders to seek lower costs to the municipality; selling the existing home for profit instead of a previous idea to use it for affordable housing; investigating building a home with fewer beds or refurbishing the current home. Some of these ideas would require starting over, while others, such as the use of the current building, have not yet been decided.

The County has been seeking more long-term care beds since 78 were lost with the closure of Picton Manor Nursing Home in 2012. Five years later, in 2019, the province promised to allow 76 more beds at the 84-bed municipally-owned home (currently H.J. McFarland Home).

The province not only demands every municipality operate a long term care home, it also requires they be kept to standards.

It was noted not moving forward on the new “Class A” home could also jeopardize the existing municipal operating license, which will expire due to the Ministry of Long-Term Care’s policy to phase out “Class C” beds by the end of 2024.

“The future is a lot closer than we think,” said councillor Phil St.-Jean. “I predict in five years time we’re probably going to lose two privately run facilities in this community as they are faced with the same… difficult choices. We have a growing population and it’s an aging population. The needs are greater here.

“Do we want to see our elderly who spent most of their lives here, have to go to Bancroft, have to go to Kingston, or wherever? Then the challenges and the struggles that puts on local families… We don’t have enough beds – in our region let alone our County.”

Councillor Bill Roberts reminded of the disastrous stories that came to light during the COVID-19 pandemic.

“I think we all saw some pretty terrible stories about long-term care facilities…barely living, filthy living circumstances… We have roughly 630 long-term care homes in Ontario but only 16 per cent of them publicly owned. I suspect the closures of privately-owned long-term care facilities have something to do with squeezing profit margins.” He suggested council could set even higher goals “like who’s doing the best job out there in long-term such as Norway and Demark… Maybe we should map out what we want for our older, aging citizens, not what we could just get by with.”

Councillor Sam Branderhorst also noted private homes starting to close and worried the municipality must pay attention and move forward now to avoid a crisis point in the near future that she likened to daycare, hospitals, doctors and nurses.

The province is offering another round of a construction funding subsidy (CFS) top up for a second year to projects that are shovel ready by Nov. 7 2024 – including site plan approval, building permit approval, a tendered construction package, and confirmation of debt financing with Infrastructure Ontario.

During the 2024 capital budget discussions, the estimated $97 million 160-bed project was approved conditionally on additional funding becoming available, as the County was unable to meet the province’s tight shovel ready deadline in 2023.

The municipality has met with the ministry and received positive feedback.

“Unlike the last round when you had to apply for the funding, in this round, you were sent a letter if were eligible,” said CAO Marcia Wallace. “It’s conditional on meeting a number of milestone dates… so it’s a pretty steep hill, but if you have all these milestones completed then they will give you the agreement for the funding, and the funding… We think we are on track for that… We just need council’s approval to actually embark on all the work it’s going to take.”

However, the vast majority of money comes as monthly payments over 25 years.

The report noted the County has the debt capacity under its Annual Repayment Limit (ARL) as the municipality won a landmark case at the Ontario Land Tribunal which exempts the portion of debt incurred that is secured by provincial funding. Only the municipal portion of the build costs (33.7M) will impact the ARL.

“The fight’s not over,” stated Wallace. “If we were just talking about the municipal portion, the 33 million over 25 years, it would have a much smaller impact. But you have to buy the whole house; you can’t just buy the portion you’re supposed to pay for. So we get that from Infrastructure Ontario, who is a corporation wholly owned by the province. So we are paying the province for debt financing so they can charge us five per cent, which is less than it would be if we went to the bank. But we are paying a tremendous amount of money in interest… the only reason we have to take out that loan is because they give the money slowly, over time…. This fight is not over about the interest and I would say that the Eastern Ontario Warden’s Caucus, that the mayor represents all of us on, is about to publish a well-researched paper on infrastructure deficit and the challenges of infrastructure and this issue of debt financing and the impact especially on small, rural communities like ours that don’t have the ability to raise funds easily and that any increase to our tax levy is a burden to taxpayers.”

Mayor Steve Ferguson said he would report on the caucus as soon as he can, and that Prince Edward County is not alone as a municipality having infrastructure gaps and trying to figure out to to pay everything mandated by the province – including long-term care homes, roads, housing and more.

“This is a big problem and as part of the Eastern Ontario Wardens’ Caucus we will advocate with the province to mitigate the financial impact on all our residents.

In the meantime, he recommended council move forward.

“This matter should weigh heavily on the conscience of everybody around the horseshoe, making sure those vulnerable residents of our community, many of whom are long-standing residents, are cared for appropriately, and with the respect they deserve.”

There is a total of $2.7 million of funding from prior years to support the design of the redevelopment project. To date, $528,000 has been spent on these costs.

A net zero feasibility study is to be completed next month and will determine sustainable options that could be incorporated into the design. The study is required to apply for the Federation Canadian Municipalities (FCM) Green Municipal Fund.

“The additional construction funding subsidy top-up eases the financial pressure on the municipality and makes the project financially feasible,” stated Kyle Cotton, director long-term care, in his report to council.

Capital costs for the build are as follows:
Total build cost estimate $94,700,000
Capital Funding Subsidy (CFS) $31,455,325
CFS Top Up $29,200,000
Planning grant $250,000
Total to be raised: $33,794,675

The majority of the provincial CFS funding is provided over 25 years, with just $12M of that funding provided at the time of construction. Therefore, the entire project cost will require debt servicing. The total cost of borrowing over the life of the loan is estimated at $63M. Considering the payments from the CFS funding, and the portion to be raised by the municipality, the operational impact on the municipal budget would be $5.7M annually. This assumes a 5.17% interest rate over 25 years.

It is suggested the increase to the levy be phased in leading up to 2027 occupancy to ease the tax burden – so perhaps 2.81 per cent in each of three years instead of all at once. The increase also coincides with the last payments of municipal support for the Prince Edward County Memorial Hospital build.

“The additional construction funding subsidy top-up eases the financial pressure on the municipality and makes the project financially feasible,” states Cotton.

“The County will receive a per diem amount totaling $56.53 per bed for 25 years, or $82.6M. This figure combines the original $21.53 ($20.78 + $0.75 extra for a medium-sized rural home) plus the $35 topup per diem. Under the top-up program a municipality may convert $15 of this funding to upfront financing from the ministry. The County intends to take advantage of this option which will reduce the overall debenture by 12.96M and the total funding over 25 years to $60.6 million.”

He noted the County will also be able to allocate approximately $2.3M from development charges for services related to long-term care, to support the long-term debt repayment and mitigate the impact on the tax levy.

The existing home was built in 1974 and has been determined to be at the end of its useful service life after 50 years. Changes to the ministry’s “level of care requirements” also call for additional space for programs and staffing.

The new 160 bed “Class A” facility is to be approximately 122,000 square feet in gross floor area, include increased resident spaces to meet or exceed ministry requirements and large open areas for community gatherings and family visiting.

McFarland Home re-development vision shared at open house