Municipal interim review notes inflection point; Disraeli housing hits finance hurdles

By Sharon Harrison
At last week’s committee of the whole meeting, council heard two presentations, the first being an interim update from the consultants on a County organizational review.

The second, a topic that isn’t often addressed publicly, is the issue of hoarding prevalence in the County, the details of which were highlighted by the Hoarding Action Response Team with an informative presentation. Click here for that story. 

Summarized below are some of the highlights from the meeting:

Service delivery and organizational review
A presentation from consultants Municipal VU Consulting Inc. was received by council with vice-presidents Andrea Clemencio and Lena Dianda providing an interim update on progress on the service delivery and organizational review it is undertaking on the workings of the County.

The purpose of the study is to look at whether the municipality is still appropriately sized when it comes to its structure and organization (and staffing levels), and the services and resources it offers and how they are delivered. It will ultimately look at where changes need to be made and is what they call a “roadmap for improvement”.

“This is a planned pro-active governance exercise,” said Dianda.

What they did share so far is that “staff are deeply invested in their work, community and each other; achievement in strategic priorities, such as transparency, public engagement and financial governance; and the current senior leadership team is functioning better than it has in years.”

They stated the challenges emerging include no shared understanding of what the County delivers, at what levels, or how decisions are made; work gets added without clear priorities or capacity, pushing some planned work aside. The County is also carrying more services and assets than it can afford; and roles, authority, and boundaries between council and administration are not consistently understood.

“This is not a municipality in crisis, but at an inflection point.”

“The current tax levels aren’t sufficient enough to maintain the services you are providing, and the infrastructure and assets you are maintaining; there is an imbalance there,” confirmed Clemencio.

Operational efficiency is constrained by inconsistent processes, systems and coordination, and planned effort will continue to be required; and organizational structure is not aligned to how the County needs to operate today.

The full, final report is expected to come to council at the end of June, to include recommendations on what improvements and efficiencies can be introduced. It was noted this study is not looking at a review of staff salaries as that is being undertaken in a separate study.

Disraeli Street housing update 
In the latest update provided by the Prince Edward County Affordable Housing Corporation (PECAHC) on the proposed Disraeli Street development, they addressed the requirements to realize construction and occupancy in 2026, where it was announced that the development has hit another road block with financing – or rather two financial hurdles – meaning there is a funding shortfall.

The construction contract with Theberge is for $2,625,000 where the intent was to use PECAHC’s loan agreement with the County to cash-flow construction and secure take-out financing at the end of construction in the form of a long-term 45-year mortgage.

Elis Ziegler, affordable housing supervisor, explained how the board has explored multiple financing options.

“First National Bank along with CMHC’s MLI select mortgage insurance program was the most viable option,” Ziegler said. “First National provided a letter of intent to proceed in the financing of the project in March for $2,163,600 – less than the total construction amount.”

In terms of ideal timing for this project, the contractor has assumed a summer construction schedule and has reduced the construction costs accordingly, the report noted. However, to realize these savings, the building must be completed before winter.

Excavation and foundations would start in the spring with the apartment modules following, for installation in less than a week, and interior/exterior finishing to be completed in early fall.

Ziegler explained the board is facing two hurdles which may preclude occupancy by the end of this year, with a gap in the financing period, and increased equity required.

Several factors led to less than 100 per cent financing of the project requiring more cash equity than anticipated, and in excess of PECAHC’s assets, Ziegler said.

“These three factors led to receiving First National’s letter of intent, which assumes debt financing in the amount of $2,162,000, including a proposed equity investment from PECAHC in the amount of $654,073.”

The minimum amount of required investment is $329,645. PECAHC requires use of most of its cash on hand to address part of the funding shortfall.

Several potential options have been discussed with staff to close the funding gap, such as using $284,000 in available municipal accommodation tax (MAT) revenue reserves, and/or pre-allocating an additional approximately $280,000 in MAT revenues in 2026.

Another option would be to waive connection and building fees. “This amount (approximately $108,000) would make a significant difference in the Disraeli Street apartments pro forma.”

Councillor Chris Braney asked if the opportunity to pursue private organizations to fund it instead was still being considered, to which Ziegler said yes, it was absolutely still a focus and is a priority. She noted however that financing is still a requirement even if a private partnership is secured.

Councillor Corey Engelsdorfer said he was struggling with the gap between what continues to be presented as ready to proceed, and what is still clearly really conditional.

“We have a project where the final equity requirement is unknown. Financing is only suggested, municipal contributions are being positioned only as optional solutions.”

“So how can we keep saying that we are close to construction without any money? And is the corporation going to be coming to council and asking it to waive the previous loans that have been given to the corporation?” he asked.

Arryn McNicol, director of finance and IT, spoke to the risks on the municipality, the first of which he said is cash flow, noting how there is a lot of money going out right now.

“If we gave a construction loan to the affordable housing corporation, we would in effect be, over the next year or so, financing that through cash flow and paying this before we actually got the loan. So that would certainly be one of the main major risks associated with that.”

“The other is, the lower funding that is required, about $330,000 (the maximum funding is about $650,000), so it’s basically finding that money, and we have identified that MAT maybe an option, but there really is no reserve that we can draw on.

We did have a $3 million deficit this year, so there is some risk there as well, and if we utilize MAT, we don’t have it for next year, and then we would be utilizing it prior to us actually having it in the bank, so that’s another risk.”

McNichol confirmed that $670,000 is owed to the County right now by PECAHC.

Councillor David Harrison said “this is a very poor place” for taxpayers to be putting their money.

“This business plan here, I wouldn’t fund on a bit, you have one or two defaults and you are in the red… I don’t like to be critical, I know the intent is there and everything, but when you are looking at that kind of money for eight units [three units are affordable; five units are market rate], and you are going to turn, and if everything goes perfect, $23,000, to me it makes no sense,” expressed Harrison.

“Why are we in the market business… either way you cut it, this is taxpayers money, and the return, if there ever, ever is one… whether you put MAT tax into it, there’s lots of other places that we need to put tax dollars besides projects like this when the private sector is perfectly capable… why are we involved in this?” he enquired.

County residents want to get back to basics, contributed Braney, and “they want to have their tax dollars put into very tangible things that are very important to them”, adding that he would like to see a privatized solution.

Councillor Phil St-Jean noted that they have had one interested party come forward, noting that conversation did not go any where.

Staff will vet the 356 tenancy applications currently in the queue to fill the [three affordable] units by the fourth quarter of 2026. Should the start of the project be delayed, winter construction is estimated to cost an additional $100,000, the report stated.

Council took no action, and no decision was made, receiving the report for information only, with St-Jean reminding that the report is not asking for anything.

“It is simply bringing the public and council totally up-to-date; there are no secrets here, its all laid out very clearly – the financial path, the financial risks, the financial challenges,” shared St-Jean.

“Quite honestly, I am tired of the accusations that we do everything in closed session and that it’s all secretive, because that is absolutely not true.”

Mayor Steve Ferguson described the report as “sobering”.

“I can’t imagine how discouraging it is for the members of the board to go through these setbacks and pauses, and having to justify every cent that is made, and try to get into every nook and cranny, to even find some kind of funding for this.”

“I want to encourage you to just keep going,” added Ferguson, “we will get the MP involved, he’s already agreed to do so in mid-May to have a conversation, because the need is out there. And the fact that this is modular construction is something that ticks a box for the federal government.”

Disraeli housing to be ready this year; Niles project a few years away

Councillor questions if County should be in the affordable housing business