North Bay Mayor Al McDonald wants the Cassellholme Board of Management to explain why the redevelopment project faces last-minute financing issues while lacking costing details.
In a four-page letter dated Dec. 16 (attached at end of article), Mayor McDonald asked why third-party cost estimates haven’t been obtained since 2017, what the “upset limit” is, and what it plans to do if municipalities refuse to take on the debt. North Bay also wants clarity on how Cassellholme plans to manage the project once it starts.
News broke last week that Cassellholme is unable to take on the debt of the long-awaited redevelopment of 240 existing beds and a 24-bed expansion. Pegged at $60 million three years ago, the latest “guestimates” exceed $90 million with the province only offering $6.5 million upfront.
The city and the municipal partners made it clear in 2017 resolutions they wanted Cassellholme to hold the debt so the project wouldn’t reduce their borrowing power for other capital projects.
East Ferris, the second-largest contributor, rejected the financing options provided to it by Cassellholme last week and also asked why information requested in 2017 hasn’t been provided.
Related story: East Ferris rejects debt burden for Cassellholme expansion
The North Bay letter goes further and lays out the timeline of discussions between Cassellholme and Infrastructure Ontario, a provincial lending agency. It notes that Cassellholme didn’t actually provide essential documents to get a loan with IO until Dec. 5.
“It is not clear why the IO process has not been pursued further,” McDonald’s letter states. “An applicant may proceed with submission of an application with a Board resolution; however, the process is not locked into place until the rate offer is received. This begs the question as to why the application and eligible debt levels, rates and covenants are not clearly known today …”
North Bay Coun. Chris Mayne, chair of the Cassellholme Board of Management, conferred with Jamie Lowry, Cassellholme chief executive officer, to respond to BayToday’s questions about the project and issues raised by Mayor McDonald.
Coun. Mayne also provided a timeline that shows they were seeking a commercial loan up until the spring, COVID priorities delayed provincial approval until October and they didn’t know IO would require municipal letters of credit until November. It also notes that the project would cost about $2.4 million more for Cassellholme to borrow the money itself than if municipalities took out individual loans.
“The City of North Bay is well represented on the Cassellholme Board,” Coun. Mayne explained via email, noting that he is joined on the board by Coun. Tanya Vrebosch and Coun. Mark King. “And the City of North Bay probably has more information and more access to information than any other partner. In addition to our regular monthly Board meetings, in the past year, Cassellholme also hosted two special meetings, to which all municipalities were invited.”
Coun. Mayne said they were pursuing avenues to get the best rates with the intention of keeping the debt on the Cassellholme books, ever since getting the legislation changed in 2017.
“In going to commercial market lenders this past spring we found that commercial markets would not lend directly to Cassellholme in spite of our having the ability to borrow,” he said, explaining that banks didn’t want to be in a position of foreclosing on a long-term care facility.
“The Provincial financing agency Infrastructure Ontario was then contacted as the best likely source of financing for the redevelopment,” Coun. Mayne said.
“Up until mid-November we had expected that Cassellholme would be able to borrow on its own but at a higher interest rate than if the funds had been applied for by the municipalities. By the end of November, we were told that regardless of who applied for the financing – Cassellholme or the municipalities, that the full cost of the financing, potentially up to $90 million, would need to be guaranteed by the municipalities.”
Coun. Mayne said the update report to municipalities in early December “was intended to advise the municipalities of the present financing options.”
He also noted that concerns about the province providing or guaranteeing its full share up front is “beyond the control of Cassellholme but certainly are under discussion.”
As the project wasn’t given provincial approval until October, the timeline indicates the tender process would paint the updated costing details quicker and cheaper than paying a consultant to do the same work under the same timeline.
Coun. Mayne said they expect the tender responses in January and they are continuing discussions with IO over the debt issues.
“Cassellholme is pleased to provide whatever information is requested by the Municipalities when it can,” he said, although “much of the final details are still subject to tender and discussions with Infrastructure Ontario.”
Coun. Mayne said the Cassellholme Board of Management will look at its process to address any information flow issues.
“Mayor McDonald’s concerns with communications will be addressed by the Board and any improvements that can be made between the Board and the various Municipalities will be acted upon,” he said.
