Stadium Financing Interview With Mayor Fougere

At their meeting on Monday, city council will be discussing the financing plan for the new stadium. We have a piece about it in the current issue which includes interviews with Mayor Michael Fougere and with Brent Sjoberg, the city manager in charge of the stadium project.

Here’s a complete transcript of that interview with Mayor Fougere.

prairie dog: We’re going to be taking on a considerable amount of debt not just to fund the stadium but the wastewater treatment plan too. The report says we could reach a debt level of $339 million by 2017. Does this worry you?
Mayor Fougere: I’ll dispute the numbers with you in terms of the debt being up to $339 million because some of the debt we’re taking on we have ways to pay it back, and that’s partly what’s in the report. It talks about the $100 million will not go against our debt limit. And there’s also sources of revenue that will pay that money off directly. So that’s encouraging.

There’s no doubt that we’re going into more debt. And I’d be the last to say that we’re not. But we must build our city. This is part of building our city. We’ve looked at this. We analyzed this. I asked this question at executive committee about the level of debt, are we concerned about the level of debt? And the answer is we have to watch our debt but we are not concerned. The cost of money is less now than it has been historically. So if we’re going to be doing major capital projects including the waste water treatment plant, the cost of borrowing is much lower now than it was five years ago.

Yeah, you’re mindful of debt. No question about that. But at the same time, our capacity to build our city financially with property taxes, it’s just not possible. It’s not going to happen. We’d do nothing in this city if we didn’t rely on some form of debt and most cities do that. I could show you information from our 2013 budget that talks about our debt level relative to other cities and we’re lower, compared to Winnipeg, Saskatoon, compared to Calgary, Edmonton, Vancouver, they have a higher debt per capita and overall percentage of budget.

 

But is that before or after the debt we’re going to be taking on by 2017?
I’m not sure about that. I’m just saying historically, we’ve been that way. Yeah, we’re taking on more debt, no question about that. But, again, it’s part and parcel of building a city. But if we didn’t use it as one tool in the toolbox — not rely exclusively on debt because we can’t do that — we would be missing opportunities for building our community.

I’m a person who’s very concerned about financing and I’m frugal about how I look at budgets. But I’m seeing this as an opportunity that I think the citizens want us to do. It’s part of the larger development for downtown because we will have revenue streams from taxation on the current stadium site as well as the CP lands. I just think on balance it’s the right thing to do.

A point of clarification, in the report it mentions that our current debt limit is $350 million and that we still have to apply to the Saskatchewan Municipal Board to find out whether or not they’ll count the $100 million we’re borrowing through the province against our debt limit.
That’s correct.

That hasn’t been done yet?
Ask Brent Sjoberg that question. I know that that’s part of what we have to do. And I’m not saying it’s a given. It’s not a given until you apply. But I wouldn’t see that as an issue because that’s part of our agreement and I’m sure that’s fine. Our credit rating has gone up.

Comparing how we’re funding this stadium to other cities, the $173 million we’re going to have pay back works out to $896 per person in Regina. The stadium in Hamilton, they’re only paying $104 per person…
That deal, in Hamilton, I believe that the federal government is funding that because it’s part of a Commonwealth Games application which we don’t have. This is a lot about where the federal government should be for financing of recreation facilities and those kinds of issues.

The deal is what it is. We’ve talked about this ad nauseam. The federal government had an opportunity to participate in this and chose to walk away, which really stopped that original stadium proposal on the CP lands. We can compare to Winnipeg, compare to Hamilton, compare to other places. The province said that the amount of money they’re providing is based upon — a percentage, I believe — it’s 25 per cent, is what they do for rec facilities around the province. But if you add up all the non city of Regina sources of revenue for this project, our participation is $73 million. Not a lot of money for this, compared to what we have to do again for refurbishing Taylor Field. So we can compare whatever we want to, I understand where you’re going with that one, but those comparisons are difficult to be clear and fair on those comparisons.

We have a smaller market, smaller population, Winnipeg is bigger. I’d like to see at the end of the day how much the Bombers actually put into that facility compared to province handling it. I think there’s more when you scratch the surface when you make that comparison.

But about that $73 million, that’s just the up front costs.
What we have here, of the $73 million, some of that actually is land assembly and land. And this is the only time, that I know of, and I could stand corrected, but I think I’m correct on this one, but this is the only project that we’ve actually told the public what it’s going to cost to maintain this to make sure it stays in good repair over a 30 year period. We don’t do that on the rest of our facilities. Hopefully we’ll do that on the wastewater treatment plant too, we’ll have the same number that says, look, this is what it’s going to cost you to do that. So people know what that is. It’s over 30 years. That’s being transparent and open to say that. Yes, it is going to be the taxpayers paying that. Yes, but it’s like everything else, our taxes go to maintain our libraries, or go to maintain our wastewater treatment plant, or go to maintain the Lawson Aquatic Centre. What’s different here is we actually have a formula to say this is what it’s actually going to cost you. That’s a good thing.

The numbers are big, yes, but it’s over 30 years. What if we said we’re not going to do that, we’re not going to set money aside into a reserve, if you will, to say this is what we’re going to hold the money for? Then we find 20 years down the road or 10 years down the road the toilets don’t work or the lights don’t work or some other fundamental problem happens. Well, then we have to raise taxes to handle that. It’s sound financial planning is what we’re doing here.

The public school board has a guideline in place that X per cent of capital spending has to go to maintenance of school facilities. But I’m told they’ve never made that percentage. How can you guarantee we’ll maintain that commitment to maintenance five or six councils down the road?
I’ll never speak for a council that far ahead. It’s hard to do that. However, there’s a political price to pay if we have a reserve that’s being held or we have money set aside to take care of this and that money’s used for another purpose. That council will be held accountable for it. That’s democracy. It’s supposed to be used for the stadium and you’re using it for something else, defend that, explain that.

The report points out places where the funding can fall apart. For instance, if the Riders can’t raise $25 million, if there are cost overruns, it’s all on us. How do we protect ourselves from those risks?
Excuse me, firstly, I’m an optimist. I believe the Riders will do what they’re going to do because they didn’t just pull a number out of the air and say, “I can do $25 million,” they have thought about this, they’ve done the due diligence. I respect them as a decision maker, as an equal partner to say that they will do that. Let’s take that off the table. They’re going to do that.

The province is going to give us the $80 million, fine, and $100 million [loan] is going to be transfered and we’re going to pay that back over 30 with the facilities fee of $12 per ticket.

Now what we’re doing — and Brent Sjoberg will give you his perspective on this but this is mine — we have a team of architects and engineers who have been developing and modeling and costing out what you get for $278 million. It’s not just three or four steps removed from the marketplace. These are people who have built them before, they’ve talked to contractors, to builders, to say, “what will this cost, what will I get for this?”

The other thing is on the design-build-finance model, whoever wins the bid will actually be financing a lot of this up front. They have milestones to meet and they have scheduled payments to be made. And if we find that they’re not doing what they’re supposed to be doing, then we say, hold on guys, what are you doing? you’ve missed a milestone or you’ve missed this or did this wrong or we’re worried about timing. And we have mechanisms to hold them accountable and that’s where you shift the risk to them to do this.

So there’s always a possibility that we could be over budget. And we have to understand that. And at some point you begin to look at how it’s designed and what’s affordable then. But I do think under this model, where you have the onus and the shifting of the risk over to the builders to some degree, that we hold them accountable and we have better control over the timing and the costing. So I think we’ll be on time and on budget. So I feel very confident in this.

I know you’re an optimist, but I’m not. What if we put out a Request For Proposals and nobody shows up? Is there a contingency plan?
I just can’t imagine no one would show up. We’re going to find out. The Expression Of Interest is the first stage of it. We’re going to find out who’s interested. That’ll tell us a lot right there. And I understand we’ve done market sounding, that would certainly pertain to companies who are interested parties who’ve said, “If you do this, we’re going to be there, just tell us how this is going to work.” So I think there is definitely interest out there. So I’m an optimist.

—————————————————————————–
A quick note: I hate transcribing interviews but I do copy down everything my interview subjects say verbatim. My questions, though, not so much. I usually just jot down a couple words so I can keep track of what I asked. So while you have a complete transcript above of what Fougere said to me, my questions are only an approximation of what I actually asked him. Oh, also, there was a point where I jiggled the cord to my voice recorder and that garbled the recording so I lost a few seconds. But I don’t think there was anything important in there.

I’ll post the interview with Brent Sjoberg shortly.

Author: Paul Dechene

Paul Dechene is 5’10” tall and he was born in a place. He’s not there now. He’s sitting in front of his computer writing his bio for this blog. He has a song stuck in his head. It’s “Girl From Ipanema”, thanks for asking.

You can follow Paul on Twitter at @pauldechene and get live updates during city council meetings and other city events at @PDcityhall.

One thought on “Stadium Financing Interview With Mayor Fougere”

  1. Financial gamblers are “optimists” at heart. Otherwise they wouldn’t be gamblers.

    As for “growing the city,” there are lots of ways to grow the city. Thing about Taylor Field is, it has no legacy. It’s not Fenway or Wrigley, the Riders have never won a Cup there, it’s boring & plain. But it works. It’s not “falling apart” like the Big O. The timing of this is, c’mon, based on egos and legacies.

    I still don’t even know if I support this or oppose it. The language is silly, it’s the exact same thing we hear from bankers and investment managers and politicians every time the bubble bursts and the market crashes. So whatever to that. There’s also probably something about keeping the building boom going in all of this – as other projects wrap up, all those guys will need somewhere else to work in order to stick around. God knows what they start building in 2017…

Comments are closed.