Does the City have to borrow?
The City has historically chosen to use borrowing bylaws to fund large projects with significant funding requirements. This approach enables the City to fund the project from beginning to end.
An alternative option for Council is for the City to fund the Detailed Design Phase internally with existing funds and defer the borrowing bylaw to a later date, if construction is approved. In this case, the borrowing bylaw would be only for funds to undertake construction once the detailed design is complete.
How much will the City borrow?
The borrowing bylaw is based on an estimated budget of approximately $26.5 million for the solar farm, along with a contingency amount of approximately 25 per cent. This means the borrowing bylaw is for $33.3 million. Capital project budgets typically have contingency included, regardless if they are funded by a borrowing bylaw. The contingency accounts for unanticipated costs, or costs for which it is too early to be more precise.
As the pre-construction phases progress and more information is obtained, the cost estimate becomes more refined and the contingency is typically decreased by varying degrees depending on the project’s complexity.
What about cost overruns?
Once a budget has been set for a capital project, it is rare for the project to go over budget. Over the past few years, the vast majority (95 to 99 per cent) of the City’s capital projects have been completed within or below budget.
The solar farm project is expected to generate positive revenue during its lifecycle, providing financial benefits to the City. Even if the solar farm only broke even financially, the City would receive significant environmental benefit and this would contribute to St. Albert doing its part in meeting the challenge of mitigating climate change, a global issue.
Last edited: August 20, 2021