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County secures second award for innovative approach to financing infrastructure

Prince Edward County’s CAO and senior staff have been recognized with a second award for their novel approach to finance infrastructure for new housing development.

The Government Finance Officers Association (GFOA), which represents public finance officials throughout Canada and the United States, presented seven awards of excellence to recognize outstanding financial management. The County and the District of Oak Bay, British Columbia were the two Canadian communities to win this North American award. The other five were in the United States.

The County’s program for upfront financing agreements with developers received the GFOA’s Awards for Excellence in Government Finance. The recognition comes on the heels of the accepting the Peter J. Marshall Innovation Award at the Association of Municipalities of Ontario conference in August.

“Increasing housing options in our community requires expanded infrastructure. Upfront financing agreements are a novel way to help make that happen, and it’s great that our approach is being recognized as a model that other municipalities might want to consider,” said Mayor Steve Ferguson.

The County’s award-winning initiative was spearheaded by CAO Marcia Wallace, Amanda Carter, Director of Finance and IT, and Peter Moyer, Director of Development Services.

“At the County we seek to foster a culture of innovation,” said Wallace. “The upfront financing agreement is a prime example of thinking outside the box to tackle a persistent challenge. I am extremely proud of what we have been able to accomplish working together as a team.”

In rural communities with small tax bases, the cost of building infrastructure to support growth is daunting. The COVID-19 pandemic introduced unprecedented growth for rural communities like Prince Edward County.

With debt financing limited, and somewhat risky for municipalities, the County team found an innovative solution adapted from use in urban areas to negotiate upfront financing agreements with developers to pre-pay the development charges at the draft subdivision approval stage, rather than when building permits are issued.

This way the financial risk for growth is reduced for both the developer and the municipality and helps ensure that “growth pays for growth” and costs are not carried by the existing population through, for example, an increase in water or wastewater rates.

While this approach is used in large urban centres for multi-million-dollar projects, it has not been used in smaller rural communities.

These pre-payments will cover the County’s debt costs for this major infrastructure (including new water tower, water plant, wastewater plant, and associated trunk mains) for at least the next 10 years.

The County notes the arrangement protects the municipal ratepayer, while giving developers the certainty that their developments will be able to connect to water and wastewater infrastructure. The approach also provides the County with financial stability as it maintains and expands core infrastructure to meet the growing demand for housing.

CAO Wallace, in an award announcement with the GFOA, stated “Historically, the County was a very sleepy place… until it wasn’t. From 2014 to 2020, the county’s population increased by four per cent, and based on current planning applications, growth is expected to increase 333 per cent through 2027.”

Director of Finance Amanda Carter added “The growth happened faster than we expected, exceeding our capacity to service it.”

The population of Wellington is expected to more than double over the next three to five years.

Wellington, which has 2,000 residents, is expecting a population increase of more than 3,000 people in the next three to five years. Additionally, the lack of water pressure compromised fire safety.

The County, noted Wallace, had a real problem “even if we could have stopped the growth—which we couldn’t, as we had already zoned the land.”

An environmental assessment resulted in a Master Servicing Plan for Wellington, which determined that $68 million would be needed in the first phase of water and wastewater investment to meet immediate and short-term needs. The County’s annual tax levy is about $45 million.

Last December, the county announced its first agreements totalling more than $20 million in exchange for guaranteed access for servicing and $4 million in letters of credit to backstop the agreements. With the developers’ commitments, the council could agree to a project that represented 26 per cent of the borrowing capacity, knowing that at a minimum the next 10 years of debt payments would be covered by developers’ prepayments

“Rural communities don’t have the same tools that cities do,” said Wallace. “Sometimes, we have to create our own… Small communities like ours have to reimagine the tools we use to solve our challenges.”

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